Page 45 - Trading #101 Course – Part One: Trading Basics

TRADING #101 COURSE – PART ONE: TRADING BASICS /2017-10-06

another will differ mainly because of the difference in liquidity of
each asset. For example, currency is considered the most liquid
asset in the world and the bid-ask spread in the currency market is
one of the smallest (one-hundredth of a percent). On the other
hand, less liquid assets such as a small-cap stock may have
spreads that are equivalent to a percent or two of the asset’s value.

• Bad Fill. Three things can happen when a trader perceives that
they have encountered a bad fill. The first is that in fast moving
markets, the broker may do everything exactly right, but the market
momentum was so fast that between the time you entered your
order and the time your order was filled, the market got away from
your ideal entry price. The second thing that can happen is that
the broker may be slow in getting your order to the exchange and
therefore your fill ends up being bad. A variety of factors can lead
to one broker being slower than another including the quality of
their order execution technology. The third possibility is that on
your front-end platform, you have slow or imperfect data. The
reason that would impact your perception of the quality of the fill is
that what you were seeing as market reality when you entered the
trade was not completely accurate or was delayed information. So,
the fill may have been fast and a good fill, but your perception of
that is altered by the quality of the data you were looking at when
you placed the order.

• Slippage. This is the difference between the expected price of a
trade, and the price the trade actually executes at. Slippage often
occurs during periods of high volatility, when Market Orders are
used, and when large orders are executed when there may not be
enough interest at the desired price level to maintain the expected
price of a trade. Slippage is a term often used in both forex and
stock trading and although the definition is the same for both,
slippage occurs in different situations for each of these types of
trading.

Typically, bad fills and slippage are much less of an issue for investors and position
traders than for day traders. It is never a good thing when you get a bad fill, but position
traders feel less of an impact.

Ticker Symbols at a Glance

A stock symbol or ticker symbol is a short abbreviation used to uniquely identify
publicly traded shares of a stock on a stock market. A stock symbol may consist of
letters, numbers, or a combination of both.

45 | P a g e