One subject
Slippage and gapping
17 lessons, 28 glossary terms and 5 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
17 lessons cover this.
In curriculum order, which is the order you would meet them.
- What a market order isModule 02The trade ticket8 min
- What a stop order isModule 02The trade ticket7 min
- What a stop limit order isModule 02The trade ticket8 min
- What your orders do not protect you fromModule 02The trade ticket8 min
- What a stop out isModule 03Margin and account mechanics7 min
- What slippage isModule 04What a trade actually costs7 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 an execution model means for youModule 05The venue and your counterparty9 min
- What execution quality actually measuresModule 05The venue and your counterparty9 min
- Session overlaps and where liquidity concentratesModule 06When the market moves7 min
- The Sunday to Thursday working weekModule 06When the market moves7 min
- Rollover, holidays and thin marketsModule 06When the market moves8 min
- Volatility around events is a risk topic firstModule 08Macro and the calendar8 min
- Why stops get hitModule 09Risk, plan and practice8 min
- Standard stops and guaranteed stopsModule 09Risk, plan and practice7 min
The glossary
28 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- Black swan eventAn event outside the range past data suggested was possible, carrying an extreme market impact, and rationalised convincingly only after it has happened, from the argument set out by Nassim Nicholas Taleb.
- Breakaway gapA gap that opens as price leaves a range or a chart pattern, classified by where in a move it appears rather than by anything visible in the gap itself.
- Buy stop orderAn instruction to open a long position once price rises to a stated level, which rests above the current market and converts into a market order the moment the level trades.
- Circuit breakerA circuit breaker is a rule that halts trading once a price has moved beyond a stated threshold, imposed by a venue on every participant at once and lifted on a published schedule.
- Emerging market currencyAn emerging market currency belongs to an economy classified as developing by index providers, and typically trades with thinner depth, wider spreads and greater sensitivity to global funding conditions.
- 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.
- Exotic currency pairAn exotic currency pair sets a heavily traded currency against one from a smaller or less traded economy, and characteristically quotes with a wider spread and thinner depth than a major.
- Extended hoursExtended hours are the pre-market and post-market windows in which listed shares can still be dealt electronically, outside the exchange's main continuous session.
- 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.
- 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.
- GapA gap is the blank space on a chart left when a session opens away from the previous session's close, meaning no trading took place at the prices in between.
- 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.
- Guaranteed stopGuaranteed stop is an industry term for a stop the offering broker undertakes to fill at exactly the stated level, including through a gap, usually for a premium.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Quarterly earningsQuarterly earnings are a listed company's three monthly report of revenue, profit and guidance, released on a scheduled date that is routinely the most volatile session in that share's quarter.
- 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.
- Sell stop orderAn instruction that becomes an order to sell at the market once price trades down to a stated level, which rests below the current market and prioritises execution over price.
- 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.
- Stop limit orderA stop limit order submits a limit order once a trigger price is reached, combining the trigger of a stop with the price control of a limit, which means it can go unfilled altogether.
- Stop loss orderA stop loss order rests at a level away from the market and becomes an instruction to close the position once that level is reached, so the loss is capped at the fill obtained rather than at the level itself.
- 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.
- Thin marketA thin market has few participants and little resting size at each price, so quoted spreads widen, ordinary orders move the price further than usual, and gaps open more readily.
The market guides
5 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- Share liquidity and the opening auctionMarketsWhy turnover concentrates at both ends of the day, and how a call auction strikes its price.
- Slippage, and why it is not a feeMechanicsWhat produces a fill away from the expected price, and why the same mechanism can improve it.
- Gapping and weekend riskMechanicsWhy a market reopens away from where it closed, and what happens to orders sitting inside the jump.
- Stop orders, and what they do not guaranteeMechanicsThe four things a stop order is believed to promise, and which of them it actually delivers.
- Gulf public holidays and thin liquidityStructureThe two kinds of Gulf holiday, which closures reduce global liquidity, and what a thin book does.
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