One of the most overlooked but absolutely crucial aspects of this is how your trades are executed. In most prop firm environments, you’ll run into two main types of execution: market execution and instant execution.
Now, on the face of it, these do sound quite similar. Both approaches put you into a trade, after all. But how they function, and how they can affect your outcomes, is like night and day. Let's get into it all, keeping in mind the prop firm angle so you know which might actually be a better fit for your trading style.
Prop firms typically have tight rules—such as daily drawdown limits, loss ceilings, or profit levels you must achieve within an interval. That makes every pip count. If you're scalping or day trading in volatile conditions, any slight variation between the speed or accuracy of how your order is filled may mean the difference between surviving a challenge or blowing the account.
On platforms like MetaTrader 5, where most prop firms run their accounts, that execution style becomes even more critical. Think about it this way: you're operating a race car, and the company is lending you the vehicle. You don't want to have a lag between pressing the gas and the vehicle actually going. Same with trading—execution style is that throttle response.
Let's begin with instant execution, because this was more prevalent in older trading setups and still exists around in some firms.
With immediate execution, you're essentially saying to the broker (or prop firm's liquidity provider):
I want to buy EUR/USD at precisely this price.
If that price is still there when your order reaches the server, boom—you're in. Otherwise, you receive a "requote."
A requote occurs because the price has already moved when your order is executed. Rather than simply filling you at the next offering price, the system brakes and asks:
"The market's here now. Do you still want it?
Sounds courteous, but in practice, it can get infuriating. Consider scalp trading at a news break. You hit buy, and then you're slapped with a requote when the market surges. When you accept the new quote, the move may already be finished.
That's why many contemporary prop firms in the UK avoid instant execution. It introduces drag and causes friction for active traders.
Having said that, instant execution does provide you with some control. You can either get in at the very price you requested—or not at all. For slippage-haters (traders who detest being filled at a marginally worse price than you wanted), this can be reassuring.
But here's the bad news: in today's speedy forex market, preventing slippage usually merely means missing trades altogether.
Now let's discuss market execution, which is the default in most prop firm configurations.
Market execution is simpler. You're essentially instructing:
The sacrifice with market execution is slippage. If the market is quiet, your order will typically fill right on target where you anticipated. But if it's volatile, perhaps around NFP or a central bank announcement, you may get filled a few pips from your desired price.
Slippage works both ways. At times, it works against you; at other times, it works for you. Let me illustrate this. You could hit buy at 1.1000 and end up getting filled at 1.0998. That's a better price than what you requested. Sometimes, you end up with 1.1002.
In a prop firm environment, where accuracy is paramount, this can be nerve-wracking. But on the plus side, you don't miss trades. If you want in, you're in—no waiting for a requote.
The majority of contemporary prop firms execute at the market by default. It's quicker, more in sync with the liquidity providers today, and sidesteps the nagging headache of requotes.
Even some companies have arrangements with brokers that employ ECN (Electronic Communication Network) pricing, where your trade is matched directly with liquidity providers. That's nearly always market execution.
Instant execution is more likely to be found in firms that mimic dealing desk setups, where the firm itself is taking the other side of your trade. But since prop firms are usually risk-managing through liquidity providers, you’ll rarely see it offered these days.
With instant execution, the constant requotes are maddening. You feel like you're constantly battling the system. This agitation can result in revenge trading or lazy decision-making—both prop killers.
With market execution, the aggravation is from slippage. At times you'll feel like you were "stolen" from a pip or two. But if you can live with the idea that it's part of the game, it's a neater overall experience.
Prop firm traders must be psychologically strong, and how execution affects your emotions is as crucial as the technical aspect.
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