What is Trade Execution?

What is Trade Execution?

Execution is the process of routing, filling, and confirming an order in the market. High-quality execution minimizes slippage and ensures trades occur at intended prices.

Execution Factors

• Broker model: ECN/STP, A-book, or B-book influences routing.
• Latency: Time between sending the order and receiving a fill.
• Liquidity: Depth of market affects slippage and spreads.
• Order type: Market, limit, stop, and routed variants behave differently.

Best Practices

• Monitor slippage: Track fills relative to quoted prices.
• Use VPS: Host automated systems near broker servers.
• Stay informed: Avoid trading during known liquidity holes unless planned.
• Document issues: Keep records to escalate with your broker if fills degrade.

Order Routing and Last Look

Some liquidity providers operate with a “last look” window—orders can be rejected if the price moved. ECN venues may match instantly without last look but charge commissions. Ask your broker about routing, LP mix, and rejection policies; align your strategy with the venue that best fits its speed and size profile.

Metrics to Track

• Average and 95th‑percentile slippage by instrument and session.
• Fill ratio and rejection causes (price, size, throttle).
• Latency from click to confirm; monitor spikes during news.
• Spread paid vs. quoted minimums to detect degradation.

Time‑in‑Force and Order Flags

• IOC/FOK: Immediate execution constraints; useful on ECNs but risky in thin books.
• Post‑only: Ensures you add liquidity; avoids taker fees on some venues.
• Reduce‑only: Prevents accidental flips from net long to net short during scaling.

Pre‑Trade Checklist

• Spread within normal range and depth adequate for planned size.
• No imminent high‑impact data; if yes, adjust size/tolerance or wait.
• Confirm stops/targets are placed and position sizing matches risk plan.