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Forex trading involves some unusual elements that do not cater to inexperienced traders. The most unfortunate of these things that you should be aware of and try to avoid is requoting. But what exactly are Requotes? And why does it happen in the first place? What impact does it have on your trading?
In the Forex market, we encounter requotes when we enter a trade in the market at a given price. During the execution of the order, though, the broker refused to open it because the price suddenly changed.
Due to the market’s high volatility, which causes price movements to be fast, the broker has a hard time executing our order at the requested price. But instead of doing this, the broker contacts us via the trading platform to ask whether we wish to execute the trade at the new price or not. We call this requoting.
Requotes occur when there is a significant difference between the price you entered the trade at and the price on the market when the broker receives your order.
A requote is not always an attempt to screw the trader. To begin with, a requote might be somewhat of a risk management tactic. For instance, if you trade large lots, your broker might want to make sure you meant the trade in the first place.
In most cases, requotes are issued to big players, not to a trader trying to make a couple of dollars on some economic report. Before executing any potentially risky trades, the best brokers will always ask you first.
Upon clicking the requote statement, you will see that the price has changed. At this point, you can decide whether or not you wish to accept the new price. There is almost always a price difference between what you ordered and what you get.
Requotes occur most often in fast markets. As a result, forex brokers may fill your order or stop your order, a practice called “slippage.” However, an honest broker will inform you if the market has moved away, and you will end up with a less-than-ideal price if you continue to trade.
Taking your business to another broker might be a good idea if you’ve noticed your broker making routine requests and not getting a satisfactory explanation. The majority of brokers aren’t required to take advantage of anyone. Spreads make them plenty of money.
How do requotes happen during trading?
Our trading is usually requoting during periods of high market volatility, such as when opening buy or sell trades before or after the release of important economic news, such as:
- Interest rate.
- Gross domestic product (GDP)
- Consumer price index (CPI)
We often see fast fluctuations in the prices of most foreign exchange pairs during these periods of economic news. After economic news is released, we typically get a requotes message from our broker when we attempt to trade in the market. We typically have to wait a fraction of a second for the system to process our order and execute it in the market.
So, at this point, if there is a change in price due to extreme volatility in the market, the system will not execute the order, and it will send us a requote message asking whether we want to execute the trade on the new price. Generally, this is the case with market maker brokers. However, if your broker has an ECN network, you can avoid the time lag that might cause requotes since the ECN network makes your trades reach the server faster than market maker brokers.
Reasons for requotes in trading the forex market
You can buy and sell during trading hours in the forex market because it’s the most liquid market. So what keeps you from getting the price you want?
Simple, there is no liquidity! However, even after the liquidity dried up, traders continued to trade because they needed to place new orders or wanted to get out as soon as possible when liquidity dried up. Several seconds to several minutes are required for a chaos-like event to occur.
Okay, so what is the point of this? Does forex trading involve many parties? There are times when liquidity drops, but no one is scrambling in the market because the big players are standing on the sidelines digesting the implications of the news and data, while the small players are scrambling to open trades.
You won’t suffer the same fate as pending orders sent in advance. However, the price at which you receive your order might differ, but you won’t suffer requotes. When liquidity is low, the price can fluctuate up or down so quickly. Therefore, it would be prudent to avoid trading when liquidity is low.
Brokers execute market orders at different prices than what traders entered into the market. This is known as a requote. Requotes in the forex market can happen due to a variety of factors. Brokers, individual traders, or even the market itself may be at fault.
Requotes can also occur by other natural factors, such as events triggered by the market; traders or brokers can create others.
A particular type of currency in the forex market has massive volatility associated with its trading exercises, causing the market to move in such a way as to be considered extremely fast and, therefore, may result in a requote.
If there is massive volatility in the market, a forex trader may execute his trade with a specific price in the market. However, by the time the broker receives such an order, the market may have moved away from such a price, altering the price the broker executes the trade contrary to what the trader had planned.
What causes forex requotes?
To understand why requotes occur, you should know that when you place an order with a broker, you ask him to execute it at a specific price. The broker then attempts to exceed that, but it may not always be possible due to a variety of factors, including:
1. High volatility
You can get a requote almost any day, but not always. For example, in times of intense market activity, requotes usually occur when there are a lot of announcements or other events that create a fast-moving market.
Most of the time, the forex market moves reasonably smoothly, but sometimes it can shift dramatically. As a result, the brokerage will be extremely difficult to place an order at your requested price. If the broker cannot provide you with the requested price, they will adjust the numbers and requote you.
2. Slow internet connection or other technical issues
It would be best if you had a fast and stable internet connection to immediately send the order to the broker.
If you use slow internet, you will be more likely to get requotes because there will be a delay between the time the broker receives your order and when you click the order button. This is because price fluctuations can occur even in the tiniest of movements in forex trading. Of course, the same applies to any technical problem you may have.
3. Broker’s execution delay
A higher probability of requotes could be associated with the execution method used by the broker. However, there is a consensus that ECN brokers are the most suitable brokers to choose from as they provide fast execution.
As well, it’s best to choose a broker who offers advanced trading technology to their clients, especially with regards to trading execution, to avoid getting requoted.
How are requotes important for forex?
When a securities broker cannot carry out a transaction at the value stated in their quotation, a requote occurs. Forex and CFD trading are highly susceptible to rate fluctuations in the market, so requotes are relatively common.
By the time an investor has placed an order with a broker, the exchange rate of a currency pair may have risen so rapidly that the quoted price is no longer valid. This may prevent the broker from executing the trade at the quoted price. A requote will follow in this case. After reviewing the new rates, the investor can decide whether to proceed with the order or not.
The forex broker requotes when the forex exchange rates change between the moment you click the close trade button and when your broker executes the trade. The forex trading platform you are using displays a message when a requote occurs, informing you of the new price and asking whether you would like to accept it. The price from a requote is usually worse than your original quote.
Fast-moving markets are the leading cause of requotes. Requotes will inevitably happen if you trade around news spikes. Requotes are experienced mainly by traders trading large lots. If you trade large lots in fast-moving markets, you may have difficulty getting your broker to buy enough of your lot before price changes.
Re-quotes and Execution
When you execute your trade, requotes can significantly impact the final price.
Traders are always informed of a change in the execution price by the re-quotes statement, which allows them to decide whether or not to accept the new price.
Requotes are common when the broker’s platform utilises “Instant Execution”.
By using “Instant Execution”, orders are protected from certain degrees of slippage, thereby requiring traders to requote.
If your broker’s platform implements “Market Execution”, your orders will be executed without requotes; however, sometimes orders will experience positive or negative slippage.
Protecting yourself from forex brokers requotes
A reputable broker seems to make avoiding requotes relatively straightforward. Brokers that do not requote can be a good choice. There will be no trouble finding this claim on some brokers’ sites since this is a huge feature that brokers are often most proud of.
However, eliminating forex requotes is not as easy as it sounds. Overloaded brokers’ servers still generate requotes. What does this mean if the broker does not requote? Possibly not.
Brokers that use specific software to prevent requotes usually take longer to execute orders, but they can eliminate requotes. Therefore, it would be best to consider the consequences of choosing a broker that does not require it.
1. Don’t trade during volatile market hours.
You have to be very careful if you’re trading during volatile hours or after news announcements. When it comes to entering the market during important news releases or significant fundamental events that can cause price spikes, it’s best to avoid it unless you’re a skilled news trader and able to avoid requotes.
2. Set stop loss and take profit
Requotes apply to entry positions and can also apply to exit positions. The trade can close at a price different from expected, impacting the trade. You should set stop loss and take profit before a trade occurs, and you should not change these settings after the trade has taken place.
3. Enable maximum deviation in MT4
MT4 brokers that support maximum deviation can prevent forex requotes. If things don’t go as planned in a trade, the maximum deviation is the maximum risk you’re willing to accept. You can enable the “Enable maximum deviation” option on your broker’s website and specify a maximum deviation limit for each trade.
By setting the maximum deviation limit to 3 pips, you can expect a maximum difference of 3 pips between the requoted price and the actual price in real-time. So, for example, if an open sell is available at 1.4165, a requote will not drop lower than 1.4162.
Maximum deviation does not always mean that requotes will disappear. However, this limits your tolerance of price variance to a certain extent. Most traders who trade in volatile markets employ this feature. The tool helps them manage requotes when unavoidable, so they understand they are unavoidable in some cases.
Trades may feel hurt by requotes, but they happen more frequently. Never get frightened if you encounter requotes. You always have the option to reject a requoted offer if it is too high for you during a high volatility market anyway. It is important to note that requotes do not occur all the time, but only when large trades are involved.
Jason Morgan is an experienced forex analyst and writer with a deep understanding of the financial markets. With over 13+ years of industry experience, he has honed his skills in analyzing and forecasting currency movements, providing valuable insights to traders and investors.
Forex Content Writer | Market Analyst