Execution Definition – What is Execution? | CFI LB

execution

Execution in financial trading terms refers to the finalisation of an order by a trader to either buy or sell an [instrument] with a broker. In simpler terms, the order has to be completed and not just initiated. Only when the order has been [filled] is it deemed as executed.

 

By simply initiating the order, there is no certainty that the trader is entering into the trade, they are merely placing an order to either buy or sell. The broker will then in turn have to execute the order that was placed by the trader.

 

There are three main types of order execution. Firstly, instant execution or a market order - where the broker has to process an order immediately after it has been placed by the trader at the prevailing market price. The second method is a [limit order] where a trader agrees to a trade being executed at a specific price. Lastly, execution can occur at a request whereby the trader can choose to accept or reject the trade at hand.

 

Different orders will be executed at different times, for example [good until canceled] (GTC) orders can be executed at any time until the trader decides to retract the order, however, in the case of day orders they have to be executed on the day that they were placed before they expire at the end of the session or market day.

 

There are two ways in which a broker can carry out the orders, either they place this order digitally to be approved or they can submit it directly to the order books to be carried out immediately.

 

Key takeaways:

 

  • Execution refers to an order being carried out by the trader. This is applicable to both the buying as well as the selling of an instrument
  • There are three methods of execution, namely: instant execution, market execution and execution on request
  • Different orders are carried out at different times. Day orders have to be executed before the end of session and gtc orders are in play until a trader makes the decision to retract the order they placed
CFI Financial Group is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
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CFI provides execution-only services and does not provide any investment advice. To make an investment decision, you cannot rely on the content of this website, or on any information, opinion, report or other materials (“Information”) you receive from CFI, or its representatives. Such Information is general and does not consider your objectives and your financial situation, thus they shall not be considered in any way as an express or implied promise nor a guarantee of any profit or limit of loss. CFI shall not bear any liability in case you used or relied on such Information. Please ensure that you make your own research and seek independent advice if necessary.

Forex and CFDs are leveraged products that incur a high level of risk. A small adverse market movement may expose the client to lose the entire invested capital. The majority of retail client accounts lose money when trading in CFDs. Please be aware of trading risks and that you could sustain a loss exceeding your deposited funds, even if a stop loss is used.

CFI Lebanon is regulated by the Banque du Liban and the Capital Markets Authority

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