Take Profit, Slippage and More: Ultimate Guide on Orders and Execution

Take Profit, Slippage and More: Ultimate Guide on Orders and Execution

In the world of trading, success doesn’t only depend on what you buy or sell—it often comes down to how you do it. This is where orders and execution play a crucial role.

Orders are instructions that traders send to their broker or trading platform to enter or exit the market. Execution is when the buy or sell order is fulfilled.

Why Understanding Orders and Execution Matters

Many traders lose money not because of bad analysis, but due to poor execution. For instance, using a market order in a fast-moving market can lead to buying at a significantly worse price—a phenomenon known as slippage. Similarly, failing to use stop-loss or take-profit orders exposes trades to unnecessary risk and emotional decision-making.

On the other hand, a well-planned order strategy allows you to:

• Enter positions at desired price levels
• Control your risk exposure automatically
• Avoid emotional trading decisions
• Improve your consistency and discipline
  

Understanding how brokers execute these orders—whether via a dealing desk, straight-through processing (STP), or an electronic communication network (ECN)—also affects your trading outcome. Different models can impact your execution speed, slippage, and transparency.

Types of Orders

In trading, different situations call for different types of orders. Understanding the strengths and limitations of each order type helps you enter and exit the market efficiently, minimise slippage, and manage risk.

The most common order types used across trading platforms offered by brokers are:

Market Order

A market order is an instruction to buy or sell an asset immediately at the best available price. This type of order is ideal only when speed is more important than price, such as during news releases or breakouts.

Market orders execute instantly, but can result in slippage, especially in volatile markets.

Example: You want to buy EUR/USD now at the current price, even if it’s slightly worse than expected.

Limit Order

A limit order sets the maximum price you’re willing to pay to buy, or the minimum you’re willing to accept to sell. This type of order is ideal when you want a better price and can wait.

Limit orders avoid buying high or selling low, but might not get filled if the market never reaches your limit.

Example: EUR/USD is at 1.0860. You place a buy limit at 1.0840, hoping it pulls back.

Stop Order

A stop order triggers a market order once a set price is hit. There are two types of stop orders: buy stop and sell stop.

• Buy Stop: To buy above the current price (used in breakouts).
• Sell Stop: To sell below the current price (used in breakdowns).

Stop orders help catch momentum trades, but can trigger slippage once activated.

Example: EUR/USD is at 1.0860. You place a buy stop at 1.0885 to catch a breakout.

Stop-Loss Order

A stop-loss order automatically closes a trade to prevent excessive losses. This type of order enforces discipline and risk management.

Example: If you bought EUR/USD at 1.0860, place a stop-loss at 1.0820 to limit your downside.

Take-Profit Order

A take-profit order closes a trade when the price reaches a desired profit level. This type of order locks in profits and removes emotions from exits.

Example: If you bought EUR/USD at 1.0860, place a take-profit at 1.0900.

Trailing Stop Order

A trailing stop moves with the market to protect profits while allowing trades to run. It “trails” the market at a fixed distance, and the stop is triggered if the market reverses. This order type is ideal for Trend-following strategies.

Example: If your trailing stop is 30 pips and EUR/USD moves up 50 pips, the stop moves up 20 pips from the entry.

Time-in-Force Orders: GTC vs Day Order

Time-in-force defines how long your order remains active. There are primarily two types of such orders:

• GTC (Good ‘Til Cancelled): Remains open until filled or cancelled.
• Day Order: Expires at the end of the trading day if not executed.

Some trading platforms and brokers may offer other order types as well. Traders must understand any order type extensively before using it.

Order Execution Mechanisms

Once you place an order, the way it’s processed—called execution—can significantly affect your trading outcome. It determines how quickly and at what price your order is filled. Even if you’ve chosen the right direction, poor execution can turn a winning trade into a losing one.

Market Execution vs Instant Execution

These are two primary execution methods used by brokers.

Market Execution: In market execution, the broker fills the order at the best available price in the market, not necessarily the one you see on the screen. This execution type is used by ECN/STP brokers.

Example: You click “buy” at 1.1000, but due to volatility, your trade is filled at 1.1004.

Instant Execution: In instant execution, the order is executed exactly at the price you requested—or not at all. This order type is used by dealing desk (market maker) brokers.

Example: You try to buy EUR/USD at 1.1000. If the price changes, your broker may reject the order and offer a requote.

Pending Orders

Pending orders are instructions to open a trade when the market reaches a certain price in the future. There are several types of pending orders:

• Buy Limit: Below current market price.
• Sell Limit: Above current market price.
• Buy Stop: Above market price (momentum entry).
• Sell Stop: Below market price (breakdown strategy).
• Stop-Limit: Combines stop order trigger and limit pricing—used in volatile markets to avoid market order slippage.

Traders must use them for set-and-forget strategies, breakout trades, or entries in key support/resistance zones.

Partial Fills

An order is partially filled when only a part is filled at the expected price due to limited liquidity. It is common in large positions or illiquid markets. To avoid partial fills, traders should trade in smaller volumes or during peak hours.

Slippage

Slippage happens when an order gets filled at a worse (or occasionally better) price than requested. It happens due to high volatility, low liquidity, or latency.

To reduce slippage, traders must use limit orders instead of market orders, trade during high-liquidity sessions (e.g., London/New York overlap), and choose brokers with better execution tech (low latency, deep liquidity).

Execution quality is as important as your trading strategy. Fast and accurate execution ensures you get the price you expected—or as close as possible—while protecting you from slippage and missed opportunities.

Order Routing and Liquidity

Once you place a trade, your broker must route it to a liquidity provider or internalise, depending on the execution model.

Role of Liquidity Providers

Liquidity providers (LPs) are large financial institutions—banks, hedge funds, or prime brokers—that supply the bid and ask prices you see on your trading platform.

Liquidity providers quote buy/sell prices and fill orders, compete to offer the tightest spreads, and allow brokers to offer real-time pricing and fast execution.

Why liquidity matters:

• Tight Spreads: More competition means better prices.
• Depth: High liquidity allows larger trades without significant price impact.
• Stability: Better fill rates, especially in volatile conditions.

Smart Order Routing (SOR)

Smart Order Routing is used by more advanced or institutional-grade platforms to find the best execution path across multiple venues.

This routing system scans multiple liquidity pools or exchanges simultaneously, routes orders to the venue offering the best price or fastest fill, and optimises execution by avoiding venues with poor liquidity or latency.

Why smart order routing matters:

• Best Available Price: Finds better quotes across different venues.
• Reduced Slippage: Matches orders with minimal price impact.
• Customisable Logic: Institutions can prioritise speed, cost, or size.

Market Depth and Order Books

Market depth shows how much volume is available at each price level. It reflects true liquidity.

• Shallow Depth: A few lots at each price; prone to slippage.
• Deep Book: More volume at each level; stable fills even for large trades.

Some platforms display a Level 2 Order Book, showing:

• Best bid and ask (Level 1)
• Queued orders at various price levels (Level 2 and beyond)

Efficient order routing and access to deep liquidity reduce your costs and execution risk. It’s a hidden, but vital, part of every successful trading operation—especially for scalpers, high-frequency traders, and institutions.

Execution Models

Execution models describe how a broker processes and fills your orders. The type of execution model used can affect pricing, transparency, conflict of interest, and even how fast your trades are executed.

There are three main execution models: Dealing Desk (DD), No Dealing Desk (NDD), and Hybrid. Each model comes with its own set of advantages and trade-offs.

Dealing Desk (DD) / Market Maker Model

In this model, the broker acts as the counterparty to your trade. Your order does not go to the real market—it is filled internally.

How does dealing desk or market maker model works:

• You buy, the broker sells; you sell, the broker buys.
• The broker profits from your losses and loses when you win.
• Spreads are fixed, and execution can be fast—but not always transparent.

If you place a market buy order for GBP/USD, the broker internally fills it and holds the risk on their own books.

No Dealing Desk (NDD) Models

No Dealing Desk (NDD) model brokers route your orders directly to external liquidity providers without internalising the trade. There are two types of such models: STP (Straight Through Processing) and ECN (Electronic Communication Network).

• STP (Straight Through Processing): In this model, orders are passed through directly to LPs. The broker earns through markup on spreads or commission. There is also no conflict of interest, but slippage can occur.
• ECN (Electronic Communication Network): An ECN broker connects you directly to a pool of traders, institutions, and banks. It also offers raw spreads and charges a separate commission. Traders can also see the depth of market (DOM) on ECN platforms.

Hybrid Execution Models

Many brokers use a hybrid model—internalising small retail trades (DD) and routing larger ones (NDD). Brokers use hybrid models to manage risk exposure better, offer lower costs to clients by internalising smaller trades, and still give access to real market pricing when needed.

How to choose the right model?

Knowing your broker’s execution model helps you understand why your order was filled a certain way—and whether the pricing is truly fair.

In trading, precision isn’t a luxury—it’s a necessity. Whether you’re scalping currency pairs on MT5 or managing long-term positions in commodities, how you enter, manage, and exit your trades defines your results just as much as your analysis does.

Understanding the full range of order types, the way brokers execute your trades, and how to manage execution risks gives you a real edge. It moves you from being reactive to being in control—where rules, not emotion guide your trades.

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