Execution risk
What is execution risk, and why does the trade you planned rarely match the trade you actually get?
In plain words
Execution risk is the difference between the trade you intended and the trade you received. Prices move between the moment a decision is made and the moment an order is filled, and liquidity, size and timing determine how far the fill lands from the plan.
Why it matters
A strategy can be correct in direction yet unprofitable if fills arrive at worse prices, in partial size, or after the move has passed. Wider ranges and larger hourly swings widen that gap, so costs must be estimated before a trade, not after.
In a real week: ETH, week of 8 August 2022
In the week of 8 August 2022, ETH opened at 1700.2 and closed at 1935.31, a 13.83% gain, within a 22.53% range between a low of 1656.78 at 00:00 UTC on Wed and a high of 2030.0 at 07:00 UTC on Sun. The largest 1-hour move was 6.78% at 12:00 UTC on Wed. A plan written at the open could fill far from its intended price.
A common mistake
Treating the planned entry price as the price received. Between decision and fill, the market can move by more than the expected edge, turning a winning plan into a losing trade.