Trade Execution: Focus is Everything

Cobra Trading, Inc.
Feb 15, 2022

There are many important factors that contribute to the success of your trades. Developing a good trading plan is a big one, as well as diligently following it as you enter and exit the trades. Your execution is incredibly important since this is where theory (your knowledge and trading plan) meets practice. You may have a valid strategy that should make you profitable on paper, but if your execution is mismanaged, you won’t get the results you’re looking for. 

Timing is of the essence when it comes to trade execution. This is why we believe direct access brokers are better than big box brokers for most day traders. Direct access allows your orders to go through within a fraction of a second, while the same order may take up to 1-3 seconds elsewhere. Mere seconds don’t seem like that big of a deal at first. However, that may be the difference between entering and exiting the trade exactly where you planned, and getting some slippage on both ends, ruining your risk/reward ratio. That is especially true in the case of illiquid stock or a stock that’s receiving a lot of attention from other traders. That’s how slow execution cuts into your day trading profit with every transaction.

It’s important to note your broker’s delayed order processing is not the only thing that can slow you down. Having to put in your order manually can also make you miss the optimal entry point. Using hot keys can help you enter the trade faster and allow you to get in as soon as you see your signal. This way, you don’t waste precious time typing out your entire order. 

Again, we’re talking about a second or two, but that’s a long time within a shorter trading timeline. For scalpers, missing the ideal entry can lead to multiple bad consequences. If you’re in later than you should have been, you may want to exit right away and cut your losses as soon as possible, turning an otherwise good trade into a failure. Or even worse, you may be tempted to go against your plan and stay in the trade longer than you should have. This way, not only are you dealing with a higher risk, but you’re also developing unhealthy habits that can affect your trading in the long term.

So utilize every tool your broker offers you to master not only your plan, but also your execution. Where you get in and out is just as important as how quickly you manage to enter and exit the trade.

If you’d like to learn more trading tips and tricks, make sure to check out our educational blog posts on the website and Youtube channel.

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