Execution Speed, Requotes and Market Gaps

Execution speed

Brokers advertise average fill times of a few tens of milliseconds. For a trader holding positions for hours, the difference between 20 and 200 milliseconds is invisible. For a scalper or an expert advisor placing many orders, it adds up, and a virtual private server near the broker's data centre becomes worth paying for. Speed also depends on your own connection; a broker cannot fix a slow home network.

Requotes

Under instant execution the broker promises the price you clicked or nothing. If the market moves, it declines and offers the new price; accepting it is a choice, and in a fast market you may get several in a row. Requotes are annoying but honest, since you are never filled at a price you did not agree to. Under market execution there are no requotes and there is slippage instead. Neither is better in every case; know which your broker uses.

Gaps

The market can move from one price to another without trading at any price between: at the Monday open, when the weekend's news is priced in at once; at the release of a major figure; or in a shock. A stop inside a gap fills at the first price on the other side, a limit fills at the better price, and a position without a stop simply loses whatever the gap took. The 2015 Swiss franc event moved EUR/CHF by around 20 percent in minutes.

Preparing for gaps

• Reduce or close positions before the weekend and before events you know about.
• Size positions so that a gap several times your stop distance is survivable.
• Use guaranteed stops where the broker offers them and the event justifies the premium.
• Choose a broker with negative balance protection, so the worst case is losing the account and not more.

Key takeaways

• Execution speed matters to scalpers and bots; to most traders it does not.
• Requotes are instant execution's version of slippage.
• Gaps defeat ordinary stops; size, timing, guaranteed stops and negative balance protection are the defences.