Execution refers to the process of buying or selling a security in the market. It is the act of completing a trade, in which the buyer and the seller agree on a price and the transaction is settled. The term execution is typically used in the context of stock market trading, but it applies to other types of securities as well.
When an investor places an order to buy or sell a security, the order is sent to a broker or a trading platform, which then matches the order with a willing buyer or seller. Once the order is matched, the trade is executed, and the security is transferred from the seller to the buyer. The price at which the trade is executed is known as the execution price.
Execution can happen in different ways, for example, orders can be executed at the market price, which is the price of the security at the time of the order, or at a limit price, which is a specific price set by the investor. Additionally, orders can be executed using different methods, such as market orders, limit orders, stop-loss orders, and others.
It’s important to note that execution is not always instantaneous, and there may be delays due to market conditions, the size of the order, or other factors. Additionally, the execution price may be different from the bid or ask price, which are the prices at which buyers and sellers are willing to trade a security. The execution price reflects the final price at which a security is traded.