How to Use Instant Execution Orders

How to Use Instant Execution Orders (IEOs)

Instant execution orders are also referred to as market orders and are the most commonly used method to activate spread bets. You can utilize them to immediately initiate either a short or long bet or to close them. For example, envisage that your broker has quoted a daily spread for the EUR/USD at 1.3300 – 1.3302. You could now execute an instant execution order and buy a spread bet immediately at 1.3302 or sell one at 1.3300.

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You can also utilize market orders to instantly close your spread bets. For instance, imagine you did open a daily long spread bet using the EUR/USD as its underlying asset with an opening price of 1.3302. Envisage that a few hours later the spread for the EUR/USD now stood at 1.3320-13322.  You could now implement a market sell order and take your profit early before the designated expiry time at the end of the day.

Risks of Instant Execution Orders

Instant execution orders have been specifically designed to execute spread bets at the current market value. However, probabilities exist that you could still open a spread bet with a value that does not match the quoted one. This is because quotes are being continuously updated and a small period of time is required to fully implement a market order. This time delay can be sufficient sometimes, i.e. even 02 seconds would be enough, so that you could miss the quoted number.

For example, imagine your broker has just quoted a spread for the EUR/USD at 1.3256:1.3258 and you decide to sell at the quoted value of 1.3256. However, by the time your bet is fully implemented, the spread could have moved slightly to 1.3254:1.3256. As such, your trade would open at 1.3254 instead of your desired 1.3256. Similarly, if you had attempted to go long at 1.3258, your trade would have been initiated with an opening price of 1.3256.

Consequently, you need to be aware of this feature and plan your trades accordingly in order to compensate for any slippage in the quoted values. However, you are advised not to become too paranoid about this problem as you are most likely to open at the quoted price for a large proportion of the time.

Market on Close Orders (MOC)

Many spread betting traders prefer to adopt a strategy so that they can liquidate all their positions before they retire for the day. They can accomplish this objective by using the Market on Close Order, which is easy to understand and implement. The MOC is an instant execution order to buy or sell a spread bet which is enforced at the very instant the markets close for business.

For example, imagine that you decided to open a long spread bet based on the EUR/USD during the morning session. Although you always have the option to close this trade at any time, you opt to do so at market close. As such, envisage that the market did rally then you could achieve this objective by implementing a SELL MOC at any time after you opened your bet. Similarly, you can lock-in your profits for short bets by activating a BUY MOC.

You can also utilize MOCs to effectively control your losses if you did not want to carry them throughout the night. For example, consider that you opened a short spread bet using the EUR/USD with an opening price of 1.3200. However, this currency pair drifted higher during the day placing your bet with an ‘out-of-the-money’ status. You decide that as the current trading conditions are too volatile, that you would restrict your loses by closing this trade at the end of the business day. You could achieve this goal by executing a long MOC.

In order to operate MOC proficiently, you need to know when the markets you are trading officially close. This information is vitally important as some markets remain active around the clock and only close at the end of the week. However, all markets have official closing times. If you are unsure about any of them then you should contact your spread betting broker in order to confirm these key closing times.

Another significant point that you must appreciate when utilizing MOC orders, is that your spread bets may not always be closed at the exact quoted price. This is because MOC orders are fully implemented within the final one minute of trading. This short period of time often experiences high volatility resulting primarily from profit-taking. Therefore, although the displayed settlement price of the EUR/USD is 1.3351, your MOC order may result in a final value of 1.3349 or 1.3352, etc. because of slippage.

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