W&F Issue 12 2018

www.wealthandfinance-news.com 20 Wealth & Finance International - Issue 12 - 2018 When it comes to trading, having a great strategy is obviously important, but quality of execution also plays a critical role in determining your levels of success. Any requote, rejection or delay in the execution of your trade could impact your trading plan and potentially your profitability. While market volatility and rapid price movements present opportunities for seasoned traders, the speed and reliability of your broker’s execution engine can actually affect the price of your trades. When the market moves suddenly, the price at which an order is executed might not be the same as the original order price, resulting in slippage. For example, a buy order could be executed at a higher price or sell order could be executed at a lower price. Slippage is often the result of natural price fluctuations, which means orders are filled at the market price when your order reaches the trading engine. Execution delays add unpredictability to your costs and every millisecond counts. With currency prices updated up to 100x per second, the faster your trades are executed, the less likely you are to experience slippage. However, slippage can also occur as a result of algorithms that enable brokers to take a “last look” at your trade before it is executed and alter it in their own favour. A controversial practice, last look allows the broker to delay or reject trades even if they’ve already agreed a quoted price. It’s important to make sure your broker doesn’t engage in this practice. So, when it comes to execution, what should you look for in a trading platform? 1. Average execution time This needs to be in milliseconds, not minutes. Choose a broker with an institutional-grade engine that offers an average execution time less than 0.001 seconds. 2. Trades filled at the requested price or better Also, check the percentage of trades filled at the original order price or better. Once again, you want this to be as close to 100% as possible, so aim for 99% as your guide. 3. Requotes and rejections Requotes and rejections can have a negative impact on your levels of success, so ensure your broker does not engage in “last look” delays, preferential queuing, rejections, or any other intervention. Above all, you should look for a broker that employs fair and transparent business practices, especially when it comes to their execution engine and pricing model. Every trader is different, but it’s always wise to look for a reputable, regulated broker that combines advanced trading technology and charting tools with superior execution. By David Hodge, CEO EMEA of OANDA. The Importance of Execution