Level 2 - General trading concepts
Orders, spreads and fees
Understand market orders, limit orders, bid/ask spread, fees and slippage.
Market and limit orders
A market order tries to trade immediately at the best available price. A limit order sets the worst price you are willing to accept, but it may not fill. Neither order type is automatically better; the right choice depends on liquidity, urgency and plan.
Spread and slippage
The bid is what buyers are offering and the ask is what sellers are requesting. The difference is the spread. Slippage happens when the actual execution price differs from the expected price, often in fast or thin markets.
Fees change the result
Trading fees, spreads and currency conversion costs all reduce returns. Strategies that aim for small gains can be especially sensitive to costs.
Practical example
A strategy aiming to make EUR 2 per trade may fail if spread and fees average EUR 2.50. The idea might look good before costs and weak after costs.
Important terms
Lesson quiz
Answer all 3 questions, then submit. You need 3/3 correct to unlock the next lesson.