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What is the Execution Quality?

The “Execution Quality” refers to the ability of the Forex broker to complete the order received from the trader.

Some Forex beginners may wonder, “Is it possible for orders not to be completed?” however, in reality, immediately after the announcement of important economic indicators that affect exchange rates, such as US employment statistics, orders may be concentrated at once, and the buy/sell orders placed may not be completed.

If the order is not completed, the profit and loss will not be confirmed.

Therefore, Execution Quality becomes even more important in situations where the exchange rate fluctuates significantly than in normal times, and when the trading volume is small.

If you use a Forex broker with low Execution Quality because you judge that “the spread is narrow and the transaction cost is low”, you might have to buy and sell at an unfavorable rate because the order will not be completed at the important timing when transactions are concentrated.

There is also the possibility that the cost will be high after all.

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Know your broker’s Execution Speed and Rate

In a word, the Execution Quality can be divided into speed and rate.

Execution speed refers to the time from when a trader clicks the button to decide to buy or sell on the Forex broker’s trading terminal until the actual trading is completed.

If the contract speed is slow, the rate at the time of ordering and the rate at the time of contract may differ, which is referred to as “slippage”.

When slippage occurs, you cannot buy or sell at the timing you intended, so you should avoid it as much as possible.

Next, the execution rate is the probability that an order will be completed without slippage or a requote that presents a transaction amount different from the desired amount and is calculated by dividing them by the number of orders.

For example, a Forex broker with an execution rate of 99.50% means that out of 1,000,000 orders, 995,000 were executed at the intended timing, but 5,000 were slippage or requotes.

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What happens when you trade with Bad Execution Quality?

When choosing a Forex trader, we should pay attention to Execution Quality because of the disadvantages of low Execution Quality are serious.

It is forbidden to think lightly that “a slight deviation will not have much effect”.

If the Execution Quality of the Forex trader is low, and if the transaction is not completed at the intended timing, an unexpected loss may occur.

For example, suppose you have 100,000 EUR/USD and you have a profit-taking sell limit of 1.0815 USD, as important US economic indicators are coming soon.

The rate, which was 1.0802 USD, momentarily advanced to around 1.0825 USD in response to the announcement of the index, and immediately after that, it showed a volatile movement to return to 1.0808 USD.

If you are a Forex trader with high Execution Quality, limit orders can be completed without problems, but if Execution Quality is low, there is a possibility that processing will not catch up with the flooded orders and transactions will be unsuccessful and profits will be missed.

Also, let’s see what happens when slippage occurs.

Similarly, suppose you have 100,000 EUR/USD and have an unrealized loss and are timing the stop loss.

At present, the rate of 1.0802 USD is on a strong USD trend, so after placing a stop order at 1.0785 USD, the exchange rate suddenly shook to 1.0750 USD.

It turns out that the Execution Quality of the Forex broker was low, and the execution price was 1.0755 USD because slippage occurred.

In this case, the transaction was completed with the USD appreciating 30 cents from the original stop loss line, so 30 cents x 100,000 = $30,000 currencies will suffer an extra loss.

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Scalping with SuperForex

The execution quality is much more important when it comes to scalping strategy.

For example, scalping trading, which repeats buying and selling in a very short period of time, is a trading method that accumulates small profits steadily.

Therefore, it is necessary to accurately grasp the timing when a small profit is generated and place an order quickly.

However, if the Forex trader’s Execution Quality is low, slippage will occur, so the transaction will not be completed at the intended timing, and there is a risk that profits will not be made and losses will occur.

For this reason, traders who are thinking of conducting scalping trading must determine the execution quality of the Forex companies more severely than when using other trading methods.

SuperForex, as one of the most popular FX brokers in the world, provides you with the optimal condition for scalping trade.

With SuperForex, you can start trading FX and CFDs from only 1 USD/EUR of the deposit amount.

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Trade with a professional broker

One of the reasons why the Execution Quality differs for each Forex trader is related to the processing capacity of the server used by each broker.

Not all Forex companies use the same server, and each Forex company builds and operates a different server to differentiate it from its competitors.

It is necessary to determine whether the server has enough performance to handle a flood of buy and sell orders without any problems.

When choosing a Forex broker, you tend to focus on spreads and leverage, but Execution Quality is also an important factor in determining success or failure in Forex.

You don’t know how to trade with scalping strategy? Then try SuperForex’s Copy Trading service to start your investment without trading by yourself.


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