Week 1: Understand How Markets and Orders Work
The first week is about market mechanics. An algorithm sends instructions to a broker, but the exchange decides whether and at what price those instructions are executed.
Learn these concepts
- Market and limit orders
- Stop-loss limit and stop-loss market orders
- Bid price, ask price and the bid-ask spread
- Trading volume and liquidity
- Slippage, partial fills and rejected orders
- Intraday and delivery products
- Trading sessions and market holidays
- Futures and options expiry
- Available funds and margin requirements
Practical exercise
Open the market depth for one liquid stock and one less-liquid stock. Observe their bid-ask spreads and available quantities, and write down:
- The last traded price
- Best bid and best ask, and the difference between them
- Quantity available at different price levels
- How quickly these values change
This exercise demonstrates why an order may not execute at the price visible on a chart — the foundation of realistic backtesting later.
Week 1 outcome
You should be able to explain the complete journey of an order — from the algorithm to the broker and then to the exchange.
This lesson is for educational purposes only. It is not investment advice, a recommendation or an assurance of returns. Trading and derivatives involve substantial risk, and backtested or paper-trading results do not guarantee future performance.
