When we trade in the currency markets at some point we will cross with requotes. While this does not happen all the time, it can happen and the trader should know what they are, what they mean and how to avoid them.
What is a re-quoting?
A re-quoting in the Forex market means that the broker with which we are trading is not able to provide us with an entry into the market based on the price we asked at the beginning when we send the order. Usually, this occurs in highly volatile markets in which prices move up or down very quickly, usually in the periods in which important economic or political news are announced but also can be caused by some event that had a strong impact on the market.
In essence, a trader decides to buy or sell a currency pair at a particular price and click the appropriate button on the platform to do this. By the time the broker receives the order, the market price has moved too fast for the broker to execute the order at the price. When this happens the broker shows the announcement of a re-quote in the trading platform in order to tell the trader that the price has moved and to give its client the opportunity to decide whether or not to accept the new price. Almost always the new price is worse than the price requested by the trader. That is why serious brokers ask their clients before executing the trade with the new price.
What causes requotes in Forex?
As indicated above, the markets usually move quickly, however, in some occasions and without notice the price can move much faster, especially when important news are announced. Under these conditions it is difficult for the broker to place orders from their customers at the price they ask for. The Forex Brokers
with which operates a trader also have their own brokers with which they negotiate and use to execute the orders of their clients. The liquidity pool (the liquidity providers) or the broker´s brokers, can raise prices, retain orders, or simply refuse to recognize and execute anything if desired. When this occurs, the broker finds that the available price is not the price requested by the client, so it warns the trader that the trade will be executed under conditions different than expected.
How can we protect ourselves from requotes?
If we trade with a solid Forex broker, we can easily protect from a re-quoting. For this, we can place a limit order
through which we tell the broker that we are only willing to open a position at a specific price or better. Also, by doing this we also tell the broker in advance that we are not willing to pay more for the trade that this specific price and also we are ready to stay out of the market if the position cannot be opened under these specific parameters.
The requotes are common in some markets in particular and can occur at any time in the Forex market. For this reason, the requotes should be considered by any trader who regularly trade in this financial market. However, if we find that our broker requotes occur very often (even in markets with low volatility), this may indicate that the company may be suffering from lack of liquidity. If this is the case it may be advisable to seek another broker. However, if requotes occur when there is important news as the Non-Farm Payroll report
, this condition is normal and therefore we should not think immediately that the broker is not very robust and reliable, as any broker may have trouble in moments like these.