Order Books, Liquidity & How Orders Are Filled
Learn how trading venues, order books and matching engines turn your orders into trades, and how to measure and reduce the real cost of execution.
Self-study course Self-study course: written lessons, videos and downloadable materials for independent learning. There is no supervision, assessment, individual feedback or tutoring. Self-check quizzes are evaluated automatically in your browser — we do not see your results.
All 12 lessons free
Before you start
- Basic order types (market, limit, stop) from an introductory trading course
- Percentage and basis-point calculations
- A first experience of placing orders in a demo or real account
What you will be able to do
- Trace an order through broker, venue, clearing and settlement and identify the counterparty
- Calculate spread in basis points, microprice, depth and order book imbalance from a live-style order book
- Choose between market, limit, stop, stop-limit and iceberg orders by weighing price risk against fill risk
- Determine an auction price and continuous-trading fills using price-time priority
- Measure slippage, market impact and implementation shortfall in euros and basis points
- Apply a personal execution checklist that covers venue, timing, order type and liquidity
Lessons in this course
Exchanges, venues and brokers: who sits between you and the market
Follow an order from your app through the broker, the trading venue, clearing and settlement, and see who your counterparty really is.
The order book: bids, asks, depth and the spread
Read a full order book and calculate the spread in basis points, the microprice, depth and order book imbalance.
Market makers and liquidity providers
Understand how market makers earn the spread, why adverse selection and inventory risk set its width, and why quotes can vanish in stress.
Order types in depth: limit, market, stop, stop-limit, iceberg
See exactly how each order type behaves inside the order book, including triggers, gaps, time-in-force and hidden size.
How orders are matched: price-time priority and auctions
Learn how a matching engine ranks orders in continuous trading and how an auction finds a single price that maximises traded volume.
Slippage and market impact with worked numbers
Measure slippage against a benchmark, calculate the cost of walking the book, estimate market impact and break down implementation shortfall.
Best execution rules and payment for order flow in the EU
Understand what the EU best-execution duty requires from your broker, why payment for order flow is now banned, and how to compare execution quality yourself using total consideration.
Trading hours, auctions and volatility interruptions
Learn how a trading day is divided into phases, how volatility interruptions and circuit breakers stop sudden price jumps, and what happens to your open orders when trading pauses.
Liquidity across asset classes: stocks, forex, crypto and bonds
Compare how stocks, forex, crypto and bonds are traded, measure their liquidity in basis points, and estimate the round-trip cost of the same position in each market.
Flash crashes and liquidity gaps
Understand how liquidity can vanish within seconds, what three well-documented flash events teach, and how clustered stop orders can turn a planned loss into a much larger one.
Reading time and sales and volume profiles
Read the time-and-sales tape to see who was aggressive, and build a volume profile with its point of control and value area from a simple table.
Your personal execution checklist
Combine the course into a written pre-trade and post-trade execution routine, and measure your real execution cost against the arrival price in basis points.
Sector & Industry Analysis
To use your execution skills on well-researched ideas, continue with the course "Sector & Industry Analysis".
View course outline