CPT Market Structure & Order Flow Flashcards
6 cards from real CPT practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CPT Market Structure & Order Flow flashcards as text
What is 'slippage' in trade execution, and when is it most likely to occur?
Answer: The difference between the expected execution price and the actual fill price, most common in fast or illiquid markets
Slippage is the gap between anticipated and actual execution price, and it worsens when market conditions are fast-moving or liquidity is thin.
What is the 'bid-ask spread,' and how does it affect trading costs for active traders?
Answer: The difference between the highest buy order and lowest sell order; it is a direct transaction cost paid on every round-trip trade
The bid-ask spread is an implicit cost paid every time a trader buys at the ask or sells at the bid, making it a significant expense for high-frequency traders.
In futures markets, what does 'open interest' measure?
Answer: The total number of outstanding futures contracts that have not been settled
Open interest counts all contracts that are open and have not yet been closed, offset, or delivered, indicating market participation depth.
What does a 'volume profile' chart display that a standard volume histogram does NOT?
Answer: Volume distribution across different price levels rather than across time
A volume profile shows how much volume traded at each specific price level, revealing areas of high acceptance (high volume) and rejection (low volume).
What is the 'Point of Control' (POC) in volume profile analysis?
Answer: The price where the most volume was traded during a given period
The Point of Control is the single price level with the highest traded volume in a given session or profile period, acting as a key support/resistance zone.
What is a 'dark pool,' and what advantage does it offer institutional traders?
Answer: A private, off-exchange trading venue allowing large block trades to execute without moving the public market price
Dark pools let institutions execute large orders without revealing size or intent to the public market, minimizing price impact and adverse selection.