Definition§
Execution is the process of completing a buy or sell order for a security. It occurs when the order is filled, meaning that the trade has been completed in the market. The order is submitted by the investor to a broker, who determines how to execute the trade while adhering to the conditions placed by the client.
Execution vs Order Placement§
| Execution | Order Placement |
|---|---|
| Completion of the order | Submission of the order |
| Occurs when filled | Marks the initiation of the order |
| Managed by the broker | Controlled by the investor |
| Involves price, volume, and timing | Involves the decision to buy or sell |
Related Terms§
1. Bid Price§
Definition: The highest price a buyer is willing to pay for a security. The bid price is essential for execution because orders are often matched based on this price.
2. Ask Price§
Definition: The lowest price a seller is willing to accept for a security. The ask price plays a significant role in determining whether an order will get executed.
3. Market Order§
Definition: An order to buy or sell a security immediately at the current market price. It guarantees execution but not the price.
4. Limit Order§
Definition: An order to buy or sell a security at a specific price or better. Execution is not guaranteed; it will only be performed at the limit price or beyond.
Illustrative Chart in Mermaid Format§
Fun Facts and Quotes§
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“In trading and investing, it’s not what you buy that matters, but when you buy it.” - Anonymous
(Or when it gets executed!) -
Did you know? Execution times can affect overall trading costs. According to research, a delay of just one minute in execution could lead to an unfavorable price change!
Frequently Asked Questions§
Q: What factors can affect the execution of an order?
A: Several factors can affect execution, including market volatility, the size of the order, and the type of order placed.
Q: Can I cancel an order after it has been placed?
A: Yes, you can cancel an order, but it’s essential to do so before it gets executed.
Q: What does ‘order filled’ mean?
A: ‘Order filled’ means that your buy or sell order has been completed in the marketplace.
References for Further Reading§
- Investopedia on Execution
- “The Intelligent Investor” by Benjamin Graham
- “A Random Walk Down Wall Street” by Burton G. Malkiel
Test Your Knowledge: Execution Quiz§
Thank you for diving into the intriguing world of Execution in trading! Remember, it’s all about timing… and a dash of luck (or skill 😉). Until next time, happy trading!
