Mastering Requoting in CFD Trading: Navigating Uncommon Market Scenarios

As seasoned traders know, the thrill of market volatility comes with its challenges. Picture this: prices are in a frenzy, spreads are widening, and you're aiming to capitalize on the market commotion, eager to secure those precious pips. However, your excitement is met with a surprising hurdle—your broker hesitates to accept your order, presenting an additional confirmation window. What's happening here?

Unraveling Requoting in CFD

Let's embark on a journey to demystify requoting in CFD trading. In this episode, we continue to unravel the peculiar situations that traders inevitably encounter when dealing with leveraged contracts for difference. We've previously delved into the repercussions of widening spreads, the art of "stop-loss hunting," and the nuances of price slippages. As a quick recap from our last lesson, price slippage occurs when the final execution price deviates from the displayed market price upon placing a market order. It's a phenomenon that can work in your favor or against you, depending on the market conditions and the direction of your intended position.

 

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What Exactly is Requoting?

Requoting, in essence, is the rejection of an immediate order at the desired price, replacing it with an alternative execution proposal. In this episode, we explore the intricacies of requoting, shedding light on its connection with price slippages. We've discussed how price slippages can be both advantageous and disadvantageous, contingent upon market scenarios. Requoting, often perceived as an undesirable phenomenon, shares a similar narrative. It's essential to understand that, unlike price slippages, traders aren't obligated to accept the new execution terms proposed during a requote. This crucial distinction provides traders with the power to evaluate and decide whether the revised terms align with their trading strategy.

What is Requoting in CFD?

In certain scenarios, brokers may outright reject an immediate order, presenting an alternative execution price. This is what we call "requoting." Requoting is closely related to price slippage, occurring when the deviation between the price at which we place a market order and its final execution price exceeds an acceptable deviation parameter. It usually surfaces during market panics or euphoria, following the release of impactful economic data that the market has not anticipated, amidst overall liquidity decline, and an imbalance between supply and demand. Requotes often accompany expanding spreads and sudden price jumps, posing significant risks when opening instant or market orders.

When Can Requoting Occur?

Requotes are somewhat connected to price slippages, and they usually arise when the difference between the price at order placement and the final execution price is too substantial, surpassing an allowable deviation parameter. In such situations, platforms like MetaTrader may display a new order window, notifying traders of the revised execution price and offering the option to accept or reject it.

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What Triggers Requoting?

Requoting is closely tied to price slippages and tends to manifest when the difference between the price at order placement and the final execution price exceeds an acceptable deviation parameter. This occurrence is particularly prevalent during market panics or euphoria, immediately following the release of significant economic data that catches the market off guard. Requoting tends to surface in times of overall liquidity decline and an imbalance between supply and demand. These situations often accompany expanding spreads, sudden price jumps, and scenarios where opening instant or market orders entail substantial risks.

Does Your Broker Have the Right to Reject Your Order?

It's pivotal for traders to grasp that brokers reserve the right to reject an order and propose new terms under specific conditions. For instance, XTB, a leading brokerage, outlines conditions for rejecting instant orders when the base instrument's price from the liquidity provider significantly deviates from the order price. This condition underscores the broker's commitment to maintaining fair and transparent trading practices.

The Impact of Requoting on Your Trading Results

Similar to price slippages, requoting can either work in your favor or act as a hindrance to your trading results. The general sentiment is that requoting is an undesirable aspect of trading. However, traders must recognize their agency in the process. When faced with a requote, traders have the autonomy to accept or reject the proposed execution terms. This decision-making power sets requoting apart from price slippages, where traders have no option to retract from the position once initiated. While requoting is often viewed negatively because the proposed broker price is typically less favorable, traders can leverage their judgment to mitigate potential downsides.

In summary, requoting has the potential to impact trading outcomes, but only if traders willingly accept the proposed terms. Join us as we navigate through the nuances of requoting, exploring its intricacies and empowering traders to make informed decisions in the dynamic landscape of CFD trading.