What is an execution in forex?
In the context of forex (foreign exchange) trading, execution refers to the process by which a trader’s order to buy or sell a currency pair is completed or fulfilled by their broker. Execution involves several steps:
- Receiving the Order: The trader places an order through their trading platform.
- Processing the Order: The broker takes the order and looks for the best possible price to execute the trade.
- Completing the Transaction: The broker then finalizes the deal by matching the trader’s order with another party’s opposite order, or with a liquidity provider.
- Confirmation: The trader receives confirmation that the trade has been executed, along with the details of the transaction.
This process can happen almost instantaneously with modern electronic trading platforms, although the speed and quality of execution can vary depending on the broker and market conditions.
Example of execution in forex
In forex trading, an execution refers to the process of placing and completing a trade on the foreign exchange market. It involves the conversion of one currency into another at a specific exchange rate.
There are two types of execution: market execution and pending execution. Market execution occurs when a trade is executed instantly at the prevailing market price, while pending execution involves setting up a trade to be executed at a specified price in the future.
The execution process is crucial for traders as it determines the entry and exit points of their trades and affects their overall profitability.