MT4 Brokers – Instant Execution Vs Market Execution
MT4 brokers have the capability to configure their trade servers to handle MT4 market orders in one of 2 ways.
Type 1: “Instant Execution”
As you can see in the above trade window, the type is designated as “Instant Execution”, and you’ll also see an optional maximum deviation field. This was the most common type of market order configuration when MT4 first came out. The trader is able to control slippage on a market order by specifying the maximum tolerated pips deviation from the ask price in the case of a buy, or the bid price in the case of a sell. If the trade server is unable to fill within that deviation, the trade is rejected and a requote message is returned.
Examples – Alpari micro/classic, FXDD, Fx Pro, Forex.com
Type 2: “Market Execution” or STP
You’ll note that there is no maximum deviation field on this trade window, and the type is designated as “Market Execution”. There is no slippage control. When an order is placed, you’ll get the next best price the broker offers. There’s nothing stopping the broker from slipping the trade by 10 pips or more. You’ll never get a requote with this type of market order. This configuration is often marketed by the MT4 forex brokers as “Straight Through Processing (STP)” or even “ECN”. The reality is they’ve just stripped off the ability to control slippage.
Examples – MB Trading, InterbankFx, Go Markets, FXCM, PFG Best, Axitrader
What does this mean for Forex Megadroid?
It’s important to appreciate the differences because Megadroid only places MT4 market orders, and each type of market order can present it’s own unique problems.
The “Instant Execution” type can be problematic if the broker requotes excessively, causing missed trades. The advantage is your trade won’t get slipped outside the maximum deviation you set in the Megadroid settings. So you’ll either get a good fill, or no fill.
The big problem with the “Market Execution” or STP type of MT4 broker is slippage. You have no slippage control, so if your broker is prone to slip a lot, you’ll end up with terrible fills that will reduce the profit on a trade, and increase the chance of a stop occurring because the take profit target is further away than it would otherwise have been. Although you’ll never get a requote message on this type of broker, in practice trades can still get rejected for other reasons e.g. “Trade Context Busy”, “No Connection” etc.
I personally trade on both types of MT4 brokers, and both can work with Forex Megadroid. But I’ve had more failures on STP brokers because of excessive slippage. When you compare the performance of trades on various brokers over a few months you’ll soon notice the ones causing problems.
Thanks. I was disappointed to read this from ibfx since I was planning to go live with megadroid on ibfx in the next month or so. I have a suspicion that the EA will no longer work as well now. FXDD is my second choice since I don’t have the funds to commit to Alpari UK.
Hi Dr Zeus. I really hope the good performance continues at InterbankFx after their change to “Market Execution”, but I’m a little concerned it won’t. After 1-2 months of results we’ll have a good idea of the impact of these changes. Before this announcement I was actually considering adding more money to my InterbankFx trading account, and trade larger lots wthere. But now I’ve put those plans on hold.
just a point, my fxpro is a instant execution broker but the box on slippage is not ticked, do we need as your example have the box ticked ?
thanks !
Hi albatore ,
No, you don’t need to.
All MT4 EA’s submit orders by calling the OrderSend function. One of the parameters that gets sent is the slippage (or maximum deviation). This happens regardless of the slippage setting on the order window. However only “Instant Execution” brokers will use this slippage setting. It’ll be ignored by STP brokers.
Market Execution is used by those brokers to manage there risk, basically you put on order on and a hedge order is created with what ever bank offered them the price (hence STP). You get a true market rate.
Instant execution is for market makers or brokers that do not automatically cover there exposure. It will get harder and harder to find instant execution brokers as there are more and more EA’s out there that take adavantage of this causing the brokers to loss money, That and its more risky for the broker to operate this way.
If your broker losses money / doesn’t cover there risk appropriately then your cash could be a risk. Anyone who traded with Sonray will tell you all about it >..<
Hi Ben,
All MT4 brokers are market makers actually. The market maker functions are either done in-house or outsourced to a 3rd party Market Maker or “bank” as they like to call them.
The so-called “STP”: model is becoming very popular amongst the brokers because they have essentially removed any form of slippage control which works against traders.
In addition the “low spreads” are marketed heavily, but the reality is that the orders are often slipped on entry/exit a few pips so that the displayed spread on the MT4 terminal is actually misleading. For example, you might see a 1.8 pip EUR/USD spread on the MT4 terminal, but if your order is slipped 1.5 pips or so on entry and exit, the real spread is closer to 4 pips or more. I’ve seen this happen on my GO Markets account quite often.