Partial order execution occurs when only a portion of a trade order is filled, while the remaining part is left unexecuted. This situation typically arises in markets where liquidity is insufficient to fully match the order at the desired price. Partial execution is more common in large orders or during periods of low market activity.

Understanding Partial Order Execution

When you place an order in the market, it requires a counterparty to match it. If there aren’t enough buyers or sellers at your specified price, only part of your order may be filled. The unexecuted portion remains pending until it can be matched, cancelled, or the order expires.

Partial execution is most common with limit orders, as these are price-specific. However, it can also happen with other order types depending on market conditions.

Why Does Partial Order Execution Happen?

1. Low Market Liquidity: When the volume of available buyers or sellers at a particular price is low, it may not be possible to execute the full order.
2. Large Order Sizes: If your order size exceeds the available volume at the specified price, only part of the order will be executed.
3. Market Conditions: Sudden volatility or thin trading hours may lead to partial fills.
4. Order Type: Limit orders are prone to partial execution since they wait for the price to match your specification.

Examples of Partial Order Execution

1. Large Buy Order in EUR/USD:
   • You place an order to buy 100,000 units at 1.2000.
   • If there are only 70,000 units available at this price, 70% of your order will be filled, leaving 30,000 units pending.
2. Sell Order During Low Liquidity:
   • You try to sell 50,000 units of GBP/AUD at 1.8600 during off-peak hours.
   • If there are buyers for only 20,000 units, this portion is executed, while the remaining 30,000 units are unexecuted.

How Partial Execution Is Handled

• Pending Portion: The unexecuted part of the order remains open until it’s filled or cancelled.
• Broker Policies: Some brokers allow partial fills, while others cancel the remaining part of the order automatically.
• Fees: Traders may incur fees on the executed portion, depending on the broker’s policies.

Advantages and Disadvantages

Advantages:

• Liquidity Optimisation: Allows part of the trade to execute rather than missing the opportunity entirely.
• Better Price Control: Ensures that the executed portion adheres to the specified price (especially with limit orders).

Disadvantages:

• Incomplete Trades: The remaining unexecuted portion may disrupt trading plans.
• Increased Costs: Multiple executions may result in higher transaction fees.
• Missed Opportunities: If the market moves away from the specified price, the unexecuted portion may remain pending indefinitely.

How to Minimise Partial Order Execution

1. Trade During High-Liquidity Periods: Execute orders during major trading session overlaps (e.g., London-New York session) for better market depth.
2. Break Down Large Orders: Split large orders into smaller chunks to reduce the risk of partial execution.
3. Use Market Orders: While market orders can eliminate partial fills, they sacrifice price precision.
4. Monitor Order Size: Match your order size to the typical liquidity of the instrument.
5. Choose a Reliable Broker: Brokers with access to deep liquidity pools reduce the likelihood of partial fills.

FAQs

Does partial execution affect all order types?
No, it primarily affects limit orders and large trades. Market orders typically avoid partial fills by executing at the next available price.

Can I cancel the unexecuted portion of a partially filled order?
Yes, most platforms allow you to cancel the pending portion of an order.

Why do partial executions incur higher fees?
If an order is executed in multiple parts, brokers may charge fees for each execution.

Is partial execution more common in forex or stocks?
Partial execution is more common in stocks due to varying liquidity levels. Forex markets, being highly liquid, experience this less frequently.

How do I know if my order has been partially executed?
Your trading platform will display the executed portion of the order and the remaining amount as pending.

Do partial executions impact my margin?
Yes, the executed portion will occupy margin, while the unexecuted part doesn’t until filled.

Can slippage occur with partial execution?
Yes, if the market moves before the remaining portion of your order is filled, slippage may occur.

What happens if my partially executed order expires?
The unfilled portion will be cancelled if the order expires.

Are partial executions common in forex trading?
They are less common in forex due to the high liquidity of major currency pairs but can occur during volatile or low-liquidity periods.

Can brokers improve execution to avoid partial fills?
Yes, brokers with access to multiple liquidity providers can help reduce the likelihood of partial execution.

Conclusion

Partial order execution is a natural part of trading in markets where liquidity is limited or orders are large. While it can disrupt your trading plan, understanding its causes and implementing strategies such as trading during high-liquidity periods or breaking down large orders can minimise its impact. By staying informed and adapting your approach, you can manage partial execution effectively.