Price used to execute my order

Beginner Questions
1

Hi All,

Limit Orders = Only execute at the desired entry price or better.
Stop Orders = Guarantee execution, however not necessarily at the desired price.

As the above is true, how is the one EXACT entry price for a trade determined (the one which profit/loss is based on)?
eg. If going long I choose a Limit entry position and there isn’t sufficient liquidity within the market at the price I place my impending Limit trade (as Limit Orders are only executed at the exact price chosen or better), at what price would my trade actually execute?

Theoretical Scenario
Current Market Price = 1.0000
My Limit Buy Order (1 Million Units) @ 0.9500

Trader Sell orders placed at the following (obviously these positions aren’t actually known):
Short: 100,000 units @ 0.9500
Short: 300,000 units @ 0.9480
Short: 600,000 units @ 0.9450

Since my Long position is set at 0.9500 and based on the liquidity as shown above, my trade would require all three short positions to ‘fill’ my long position. So, at what price is my profit/loss actually based? Would it be 0.9450 as this is the last price used used to complete my order?

Cheers,

2

No; it’s based on the volume-weighted average.

In this case, it’s 0.9464.

Here’s the calculation, so you can see how to work it out: [(100,000 x 0.95) + (300,000 x 0.948) + (600,000 x 0.945)]/1,000,000 = 0.9464.

3

Brilliant, Thank You very much for your help lexys. Greatly appreciated.