Execution policy for foreign exchange orders

When a trader places an order, the price and quantity will be given. If the market happens to receive the trader's price and quantity at this point in time, then the trader's order is closed.

But if the price in the market at this point in time is unfavorable to the trader, or the quantity is insufficient, what about the trader's order? Do you want to execute at the market price later, or continue to wait for the next opportunity?foreign exchange marketThe exchange rate is changing rapidly, and foreign exchangebrokerIt is difficult to ask the trader every time, so there is a need for different order types. Order types are divided according to different levels: according to price classification, orders are divided into market orders and pending orders. According to time classification, orders are divided into instant, pending orders, take profit, and stop loss.

Today, let's talk about the foreign exchange order execution policy.

execution process

Operations executed by the order:

1. Send an order from the trading software to the Forex broker server and specify the order type (instant, pending, take profit, stop loss).

2. The broker server checks whether the order is correct (price, account margin).

3. The order is waiting to be processed on the broker's server through inspection

There are four possible scenarios for processing:

1. Be implemented

2. Expired and then cancelled

3. Rejection (e.g., when funds are insufficient or there is no suitable supplier in the market; or rejected by traders)

4. Cancelled by the trader

Order execution policy

The execution policy of an order usually refers to the strategy adopted when the price and quantity of a trader's order do not match the quantity currently available in the market.

On MT4, full execution or no execution is supported, while on Fortex6, TS2, MT5 and other trading software, partial transactions are supported.

FOK

FILL OR KILL, either fully executed or not executed. FOK order refers to the order placed at the limited price. If all the declared lots under the order are not fully completed, all the declared lots under the order will be automatically cancelled by the system.

This fill policy means that an order can only be filled with the specified volume. If the necessary amount of financial instrument is not available in the current market, the order cannot be executed. The required volume can be filled with several available quotes in the market at the moment.

Example: If a trader now places an order for 500 lots, but there are only 400 sell orders in the market, then the trader's order will not be executed.

partial transaction

IOC

Immediately or cancel, execute the remaining cancellation immediately. Trading contracts will be closed at the best possible price. If there is not enough liquidity to close your entire trading contract, any remaining number of trading contracts will be cancelled.

In this case, the trader agrees to execute the order at the maximum available volume in the market as long as it is within the indicated range of the order. In this case, the order cannot be fully filled, and after the available volume is filled, the remaining volume will be cancelled. The possibility of using IOC for orders is determined on the trading server.

For example, if a trader places an order of 500 orders, but there are only 400 orders in the market, then the trader's order will be closed for 400 orders, and the remaining 100 orders will be cancelled.

GTC

Good till cancelled, that is, until cancelled, the entire transaction contract will be traded at the best available price.

For example, if a trader places an order for 500 orders, but there are only 400 sell orders in the market, then the trader's order will be sold for 400 orders, and the remaining 100 orders will continue to wait until another 100 sell orders appear in the market.

Of the three transaction execution policies, only the first one is available in MT4, while both MT5 and Fortex6 will have partial transaction execution policies.

Multi-layer transaction

There will be different quantities at different prices, and a relatively large lot requires several layers of prices to be traded. The price after the transaction is called the weighted average price.

For example, if a trader buys the next 500 lots, and a sell order of 2 yuan in the market has 400 lots, and a sell order of 4 yuan has 200 lots, then the trader's 500 lot buy price = (2 * 400 + 4 * 100)/500 = 240

Order execution policy

We know that in our country's stock market, executing a trade in the same direction is to increase the position, and executing a reverse trade is position squaring. In foreign exchange trading, some places allow reverse positions.

A typical trading platform has two settlement systems: netting and hedging

net balance system

With this type of system, a trader can only hold one position in one financial instrument at any one time. If there is already a position in a certain instrument, a co-direction trade is executed to increase the volume of the position. If a trade is executed in the opposite direction, the volume of the existing position will be reduced, and the position will be squared (the volume is equal to the open volume), or reversed (if the opposite volume is greater than the current open volume). This has nothing to do with the cause of the reverse trade - an executed market order, or a triggered pending order.

The following example shows the execution of two 0.5 lot EURUSD buy trades: The execution of the two trades results in a 1 lot position in the account.

The execution result of the two transactions is a 1-lot position in the account.

Hedging system

With this type of system, a trader can hold multiple positions in the same symbol, including reverse positions. If there is already a position in a symbol and a new trade is executed (or a pending order is triggered), the new position will exist separately. The trader's current position will not change. The following are examples of the execution of two 0.5 lot EURUSD buy trades:

The execution of these transactions resulted in two separate positions in the account.

summary

In the order execution policy, MT4 only supports FOK, while MT5 and Fortex6 not only support FOK, but also IOC and GTC.

In the position settlement system, the hedging system includes the function of the net balance system, but some countries and regions do not allow multiple positions of the same variety, so the net balance system and the hedging system will be distinguished.