CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data. *Availability subject to regulation.
Requotes arise as a result of a delay between the initiation and execution of an order. During this processing delay, if the market moves, the price a trader requested to buy or sell a currency pair at may no longer be available from the broker and an alternative price will, therefore, be offered. The re-quote will usually be displayed on the trader’s platform, giving them the opportunity to accept or reject the new price, and continue with or discontinue the trade.
Execution delays may occur for a variety of reasons, including technical issues experienced when the trader uses a poor internet connection. They can also be prevalent when markets are fast-moving and volatile, such as during news releases.
Brokers who provide requotes tend to be dealing desk brokers who act as market makers, either placing the opposite of their client’s trade and gaining from their client’s losses, or hedging their client’s positions in order to prevent them incurring losses as a result of the client’s gains. Either way, this can lead to execution delays, and therefore requotes.
There are circumstances when dealing desk brokers may be preferred by a trader, and therefore requotes will need to be accepted as a part of their trading strategy. However, if requotes occur regularly and in quiet markets, it may be a sign that a broker is suffering from a lack of liquidity.
There are ways a trader can protect themselves from requotes. No dealing desk brokers (NDDs) display the most competitive price quotes offered by the market or their ECN (Electronic Communication Network), and the order is automatically executed at the best price available. Traders may, therefore, opt for ECN / STP (Straight Through Processing) brokerages to have their order executed in the quickest time possible, reducing the necessity for requotes.
Most ECN / STP brokers actually operate on a market execution basis, rather than an instant execution basis. What this means is that rather than the broker presenting a re-quote, the trade is simply placed at the best available price in the market at the time the order is processed. This will not necessarily be the price that the trader has seen on their platform, and they will not be given the opportunity to accept or reject the new price. However, trades are processed much more quickly – often within milliseconds, and if a price change does occur, it should be noted that although it can negatively affect the trader, they could also potentially benefit from the price becoming more favourable.
Setting deviation parameters on the trading platform can also help to avoid requotes as this would authorise the broker to accept a higher price if markets move, without them having to return to their client for authorisation to place the trade at the new price.
When using a dealing desk broker, a trader may also set take profit and stop loss levels before entering the trade. The take profit (TP) level ensures that a trader’s position is closed if their trade reaches a target price and stop loss (SL) level ensures that a position is closed before a price goes below a particular level. Both of these predetermine the price at which the order will be sold at (unless the client decides to sell before these levels are reached), which means that requotes will not be relevant. Traders are not able to set stop loss and take profits levels when entering into a trade if a broker is using market execution.
Whilst brokers can benefit from requotes, traders are unlikely to be offered a requote with a more favourable price. Generally speaking, a broker will offer a re-quote when the markets have moved to their disadvantage. However, regulated brokers do have a duty to take every reasonable step to obtain the most favourable outcome for clients, which should mean that requotes are kept to a minimum.
Traders may still wish to avoid requotes as they can potentially mean missing out on a good trading opportunity. Even when a re-quote is accepted by the trader and a subsequent order placed at the new price, there may be a delay while this order is being executed, during which time the markets may have moved further, and a new re-quote will be required. When the trade is carried out on a market execution basis, this series of delays will be avoided as the best available price will be applied automatically, and trades will, therefore, be executed much more quickly.
Using ECN / STP brokers that offer real-time execution of orders will help to avoid requotes and losses from slippage. The broker should be using advanced technology to ensure orders are being processed as quickly as possible, and transaction speed can be tested by setting up a demo account.
Using a regulated broker is also recommended as this will mean that they are subject to regulations that prevent them from taking advantage of their clients through requotes.
Since 2010, regulated broker, XM, have offered 100% execution of orders, with no requotes and no rejections.