One subject
Execution quality
25 lessons, 75 glossary terms and 14 market guides cover this across the academy. Each one links to its own page, and nothing is repeated here.
Trading involves risk. You could lose more than your deposit.
The curriculum
25 lessons cover this.
In curriculum order, which is the order you would meet them.
- What a financial market isModule 01What you are actually trading6 min
- What a broker does and does not doModule 01What you are actually trading8 min
- What a market order isModule 02The trade ticket8 min
- What a limit order isModule 02The trade ticket6 min
- What a stop limit order isModule 02The trade ticket8 min
- Order types, side by sideModule 02The trade ticket5 min
- What a spread isModule 04What a trade actually costs7 min
- What slippage isModule 04What a trade actually costs7 min
- How to compare trading costs honestlyModule 04What a trade actually costs8 min
- Who is actually in the marketModule 05The venue and your counterparty9 min
- Where a price comes fromModule 05The venue and your counterparty9 min
- What liquidity isModule 05The venue and your counterparty8 min
- How liquidity is aggregatedModule 05The venue and your counterparty8 min
- What depth of market showsModule 05The venue and your counterparty7 min
- How a CFD broker manages its riskModule 05The venue and your counterparty10 min
- What an execution model means for youModule 05The venue and your counterparty9 min
- How your order is routedModule 05The venue and your counterparty8 min
- What execution quality actually measuresModule 05The venue and your counterparty9 min
- Where the infrastructure sitsModule 05The venue and your counterparty8 min
- What a trading session isModule 06When the market moves6 min
- The London sessionModule 06When the market moves11 min
- Session overlaps and where liquidity concentratesModule 06When the market moves7 min
- The limits of testing on historyModule 09Risk, plan and practice8 min
- Trading robots and automated systemsModule 10Staying safe and your rights7 min
- Your statements and your recordsModule 10Staying safe and your rights6 min
The glossary
75 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- Algorithmic tradingTrading in which the decisions, the sizing or the routing are expressed as coded rules, so identical inputs produce an identical instruction every time without a person intervening.
- ArbitrageHolding the same economic exposure long in one place and short in another to capture a price difference, with the two legs offsetting so the position carries no market direction.
- Ask priceThe price at which a market will sell an instrument, and therefore the price a buying instruction is filled at, always the higher of the two sides of a quotation.
- AuctionA trading mechanism that gathers orders over a window and matches them all at one price, used by exchanges to open and close a session rather than trade it continuously.
- Automated tradingTrading in which software places the orders directly, so a rule that has been coded and switched on acts on the market without a person confirming each instruction.
- Bid priceThe price a buyer is prepared to pay, and therefore the price at which a holder of a long position sells out of it, always the lower of the two sides of a quote.
- Bid-ask spreadThe distance between the bid and the ask on one instrument at one moment, which is the first cost a position carries and is incurred the instant the position opens.
- Big figureThe leading digits of a currency quote that dealers leave unspoken because they rarely change during a session, also called the handle.
- Block tradeA transaction large enough that working it through the visible order book would move the price, so it is negotiated privately and printed to the exchange once agreed.
- BrokerA firm authorised to arrange or execute transactions in financial instruments for clients, which in retail CFD trading is also the party on the other side of every contract it writes.
- Buy limit orderAn instruction to open a long position only at a stated price or lower, which rests below the current market and executes only if price falls to the level.
- Buy sideThe institutions that deploy capital, pension funds, asset managers and insurers among them, as distinct from the sell side firms that price, execute and research on their behalf.
- Choppy marketA choppy market moves sideways with frequent reversals and little follow through, so a direction established in one bar is commonly given back over the next few.
- ClearingClearing is the step between a matched trade and its settlement, confirming terms, netting obligations and, on an exchange, replacing the two parties with a central counterparty.
- ColocationColocation is the practice of housing trading equipment in the same facility as the systems it communicates with, bought for one property only: the time a signal spends travelling.
- Conduct rulesConduct rules are the obligations a licensed firm owes in how it deals with clients, covering execution, communications, conflicts and records, and they bind the firm's process rather than any market outcome.
- Conflict of interestA conflict of interest is a situation in which a firm's own interest and a client's could point in different directions, which a licensed firm must identify, manage, and disclose where it cannot manage it.
- CounterpartyThe counterparty is the party on the other side of a contract, and on a contract for difference that party is the broker itself rather than an exchange or another client.
- Deal ticketThe record of one executed transaction, carrying the instrument, direction, size, price, timestamp and reference number that identify it uniquely afterwards.
- Dealing deskA broker's internal desk that takes the other side of client orders and manages the resulting exposure itself, instead of passing every order out to an external provider.
- Demo accountAn account running the same platform and the same quote stream as a funded one, in which every fill is produced by a simulator rather than obtained from a market.
- Depth of marketThe ladder of resting buy and sell interest at each price level around the current quote, showing how much size stands where rather than only the best price on offer.
- ExchangeAn exchange is a regulated venue that concentrates buying and selling interest in listed instruments into one order book, publishes the resulting prices, and applies the same rules to every participant.
- ExecutionExecution is what turns an instruction into a trade: the order reaches a counterparty or venue, is accepted at a price, and comes back as a fill with a time stamp.
- FillThe price and the time at which an order was actually executed, which for an immediate order is whatever the market can do at that instant rather than the price last displayed.
- Fill or killA condition attached to an order requiring it to be executed in full and at once, or cancelled outright, so that nothing rests and no part position is left behind.
- Flash crashA very fast and very deep price fall followed by a partial recovery within minutes, produced by liquidity withdrawing faster than orders arrive rather than by news about the asset.
- Foreign exchangeThe market in which one currency is bought with another, quoted in pairs and dealt over the counter across a global network of banks and brokers rather than on a central exchange.
- GappingGapping describes a market moving from one price to another with no trading in between, so an order resting in the skipped range fills at the next available price instead.
- High frequency tradingAutomated trading in which the time taken to receive data and send an order is the decisive input, measured in microseconds and dependent on sitting close to the matching engine.
- Hit the bidDealer shorthand for selling at the price a buyer is already showing, so the deal happens at the bid rather than at the higher ask.
- IlliquidA market is illiquid when little resting interest sits near the current price, so the quoted spread is wide, a modest order moves the price, and getting out costs more than getting in appeared to.
- Interbank marketThe interbank market is the network of bilateral dealing between large banks that produces the reference prices for foreign exchange, with no exchange, no central order book and no official closing price.
- Last lookLast look is the brief window in which a liquidity provider may accept or reject a request to deal on a price it streamed, after the request arrives and before any trade exists.
- LatencyLatency is the delay between an instruction being sent and it being acted on, accumulated from several separate sources along the path an order takes rather than arising as one quantity.
- Level 2 dataLevel 2 data shows the buy and sell interest resting at each price behind the best bid and offer, rather than the top of the book alone.
- Limit orderA limit order names the worst acceptable price and can only be filled at that price or better, which controls the price obtained and gives up the certainty of being filled.
- LiquidityLiquidity is the ease with which size can be dealt close to the prevailing price, and it shows in the spread, the depth at each level and how fast a book refills.
- Liquidity providerA liquidity provider streams two way prices that a broker can deal on, and the quote shown on a retail platform is usually the best of several such streams aggregated together.
- Market depthMarket depth describes how much quantity rests at each price on both sides of a market, which decides how far a large order pushes the price before it fills.
- Market makerA market maker quotes a two-way price and stands ready to deal on its own account at both sides of it, taking the other side of a client's position rather than passing it on.
- Market orderA market order asks for execution now at whatever price is available, so it fixes the timing of a trade and never the price.
- MetaTrader 5MetaTrader 5 is a multi-asset trading platform published by MetaQuotes, supplied by brokers who run their own servers behind it and set the prices and conditions it displays.
- NettingNetting collapses offsetting obligations into a single one, whether that means reducing long and short size in an instrument to one position or many payments between two parties to one transfer.
- Offer priceThe offer price is the price at which a seller is willing to deal, the higher of the two sides of a quote, and therefore the price a buyer pays.
- Offsetting transactionAn offsetting transaction is an equal and opposite deal in the same instrument with the same firm, which either closes the original position outright or leaves a matched pair standing beside it.
- One click tradingOne click trading is a platform mode that sends an order the instant the bid or the offer is clicked, with no confirmation step between the click and a live instruction.
- Opening auctionAn opening auction sets the first official price of an exchange session by collecting orders during a call period and matching them all at the single price that trades the largest volume.
- OrderAn order is an instruction to deal that names an instrument, a direction and a size, and either executes on receipt or waits until a stated condition is met.
- Order bookAn order book is the list of unexecuted buy and sell orders at each price, sorted best to worst, showing the quantity waiting at every level of a market.
- Order flowOrder flow is the stream of buy and sell orders arriving at a venue, studied as a record of what was transacted rather than a picture of where price has been.
- Order routingOrder routing is the path an order takes between the platform it was sent from and the place it is executed, and the rules a firm applies when choosing that path.
- Over the counter (OTC)Over the counter describes a trade agreed directly between two parties rather than through an exchange, so the terms are set bilaterally and each side carries the other as its counterparty.
- Partial fillA partial fill executes only part of an order's quantity, because the volume available at prices the order accepted ran out before the whole of it could be matched.
- Pending orderA pending order is an instruction to deal at a price the market has not reached yet, held inactive until the quote trades at that level or until the order expires.
- Price improvementPrice improvement is a fill obtained at a better price than the one requested or displayed, which on a market or stop order is slippage that fell in the order's favour.
- Quantitative tradingQuantitative trading derives its entry, exit and sizing rules from statistical work on historical data, so the decision comes from a tested rule set rather than a discretionary reading.
- QuoteA quote is the two prices an instrument is available at right now: the bid, at which it can be sold, and the ask, at which it can be bought.
- RequoteA requote is a dealer's reply that the price an order asked for is no longer available, offering a fresh price which has to be accepted or declined before anything is executed.
- ScalpingScalping is a style of trading that takes many positions in a session for very small price moves, holding each for seconds or minutes, which makes dealing costs the dominant term in the arithmetic.
- Sell limit orderAn instruction to sell at a stated price or higher, which rests above the current market and executes only if price rises to the level, so the price is controlled and the execution is not.
- SlippageSlippage is the difference between the price an order was expected to fill at and the price it actually filled at, and it occurs in both directions.
- SpreadThe spread is the difference between the price at which an instrument can be bought and the price at which it can be sold at the same moment, and it is paid on entering and on leaving a position.
- Stop runA stop run is a fast move through a level where protective orders are known to cluster, which triggers them and produces a burst of one sided volume before price frequently returns.
- TickA tick is one update to an instrument's price: the smallest event in a market's record, carrying a new bid, a new ask or both, with the moment it arrived.
- Tick sizeTick size is the smallest amount an instrument's quoted price is allowed to move, set in the contract specification rather than by the market or by any individual firm.
- Time in forceTime in force is the instruction attached to an order saying how long it stays available to be executed before it is cancelled, from the instant of submission to an indefinite rest.
- Trade confirmationA trade confirmation is the record a firm issues after an order is executed, stating the instrument, the direction, the quantity, the price obtained, the time and the charges applied.
- Transaction costTransaction cost covers everything a position costs to open, hold and close: the spread crossed at each end, any commission, nightly financing, and slippage between the price requested and the price obtained.
- Two-way priceA two-way price quotes both sides at once, the price at which the quoting firm buys and the price at which it sells, so neither side is set after the direction is known.
- UptickAn uptick is a price printed higher than the one immediately before it, the smallest recordable step upward in a market's sequence of prices.
- VolumeVolume counts how much changed hands in a period, measured in contracts or shares on an exchange and, where no central record of size exists, in price updates instead.
- Volume weighted average price (VWAP)Volume weighted average price divides the total value traded by the total volume over a period, so every price counts in proportion to how much dealt at it rather than counting once.
- WhipsawA whipsaw is a sharp move that reverses almost immediately, so an entry taken on the first leg is undone by the second and stops can be triggered on both sides in quick succession.
- Working orderA working order is an instruction the broker has accepted and is holding live, waiting for its price or condition to be met, as distinct from one already filled or not yet placed.
The market guides
14 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- How a currency pair is quotedMarketsWhich currency is the base, what the two sides of the price mean, and how a pip becomes an amount.
- Index rebalancing and review datesEventsHow committees decide constituents and weights, and why the close on a review date carries unusual volume.
- How a spread is formedMechanicsWhere the bid and the ask come from, what widens the distance, and why a spread is not a fee.
- Slippage, and why it is not a feeMechanicsWhat produces a fill away from the expected price, and why the same mechanism can improve it.
- Order types referenceMechanicsThe full set of order types a CFD platform accepts, and the time in force settings that go with them.
- How a stop order actually fillsMechanicsThe four stages between a resting stop and a settled fill, and when trigger and fill price diverge.
- Market hours and the trading dayMechanicsWhere a trading day starts and stops, and what a session break changes about orders and positions.
- Rollover and the daily cutMechanicsWhat happens to an open position at the daily boundary, and why spreads widen around that moment.
- Order routing and executionMechanicsAn order's journey from click to confirmation, and what a best execution obligation requires.
- Execution quality and how it is measuredMechanicsThe four measurements that describe how orders are filled, and what each of them cannot show.
- Liquidity and depth of bookMechanicsWhat the lower rows of an order book describe, and why the best price is only true for a quantity.
- Requotes, rejections and partial fillsMechanicsWhy an order comes back as something other than a trade, and how each outcome reads on a statement.
- Price sources and how a quote is builtMechanicsWhere a CFD price comes from, how an aggregated book is assembled, and the filters in between.
- Tick size and minimum incrementsMechanicsWhy prices move in fixed steps, who sets their size, and the three grids that decide what a venue takes.
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