Price Execution & Accuracy

Written by JS T. Alexander | 20 April 2009

Bank and institutional contributors provide the bid and asking prices that reflect the true market sentiments where trading of these foreign currencies takes place. Brokers and other institutional facilities that provide the trading platforms have contributory banks that provide the price data where it bases the bid and asking prices from.

And these prices are marked to market when executed and are accurate under normal market conditions. However when adverse price fluctuations occur; the spread between the buy and sell differ and at times are wider because of the rapid price changes that happens in the market place. A split second difference is vital and can mean either a loss and /or gain between prices. That is also why a true and proven trading technology is being developed for the foreign exchange market. With the current issue of the mark-to-market the return of the up-tick entry system is being applied in the stock market trading system especially for those who would want to avail of this strategy in a rapid down market move.

Price adjustments are made in the order system which may sometimes appear like haggling bid and asking prices with the market while prices move rapidly and would have to adjust prices as it move. These tend to loose control of market strategy where one has to give up its price range for stop loss and profit take basis. Although for some it is a good move to state one’s tolerance levels for lose and gain as a cautionary technique for most individual traders. However, tolerance levels are developed through certain price parameters and are done even before any trading is made in the market place. Pre-calculated strategy will always be a good strategy and trade plan

Most broker-dealers provide statement disclosures that in the event that rapid price actions are seen in the market it is very difficult to achieve a price without entailing slippage and or unconfirmed orders. Others may claim not to have this kind of technical problems but the price slippage occur during rapid price movements and whenever there is low liquidity in the market where market makers and institutional dealers may be able to take advantage of the situation to push price ranges to a wider degree without most of the traders is not familiar with. It is only those traders and dealers who are very familiar with the backend side of the trade that enables them to see how the market behaves in high profile events.

These events are major fundamental news that comes out during the months were most analyst and strategist wait for. It is being used to cater to a more fundamentalist group of traders as well as investors that rely on their background knowledge and experience to use this as an advantage for their trading plans to execute trades simply based on economic news and reports. Most proprietary traders trade on percentage points for more profit objectives. Medium and long term risk management systems are applied and some times algorithmic formulas is also used to trade in this volatile market. That is why their main concern is not on the basis of spreads but the emphasis is more on directional movements of the market.