Algorithmic Trading

A centralized, price-time-priority queue of resting buy and sell limit orders. Bids sit below the best ask; asks sit above the best bid. Incoming marketable orders consume liquidity from the opposite side.

Spread = best ask − best bid. Mid-price = (best bid + best ask) / 2. The spread compensates liquidity providers; the mid is a common fair-value reference but is not tradable.

The cumulative size resting at and beyond the best bid/ask. Greater depth means a large marketable order walks the book less and pays a smaller average price concession.

A market order executes immediately against resting liquidity at whatever prices clear the quantity (takes liquidity, pays the spread). A limit order rests in the book at a specified price (provides liquidity, earns the spread but risks non-execution).

Stop: becomes a market/limit order once a trigger price prints. IOC (immediate-or-cancel): fill what you can now, cancel the rest. FOK (fill-or-kill): fill the entire size immediately or cancel all. Peg: limit price tracks a reference (mid, bid, or ask) dynamically.

Tick size is the minimum price increment a quote may move. Lot size is the minimum (or required multiple of) trade quantity. Smaller ticks tighten spreads but reduce queue value; larger lots batch liquidity.