How markets work

Bid, ask and the spread

At any moment a market shows two prices: the bid (what buyers are willing to pay) and the ask or offer (what sellers want). The difference between them is the spread. Highly traded markets tend to have narrow spreads; thin or volatile markets have wider ones. The spread is a cost you pay the moment you enter a position.

Order types

• Market order — executes immediately at the best available price. Fast, but the exact fill price is not guaranteed in fast markets.
• Limit order — executes only at a chosen price or better, giving price control at the cost of possibly not filling.
• Stop order — becomes active once a trigger price is reached, often used to limit a loss or enter on momentum.

These building blocks let participants express not just what they want to trade but how and when.

Liquidity and slippage

Liquidity is how easily an asset can be bought or sold without moving its price. Deep, liquid markets absorb large orders smoothly; thin markets can jump on relatively small ones. When a market moves between the instant you send an order and the instant it fills, the difference is called slippage — and it tends to hurt most precisely when markets are most volatile.

What actually moves prices

Prices reflect the collective expectations of everyone trading. Common drivers include:

Driver	Why it matters
Interest-rate expectations	Shifts in central-bank policy change the relative appeal of currencies.
Economic data	Inflation, employment and growth figures reset expectations in seconds.
Geopolitics	Conflict, elections and policy shocks drive uncertainty and volatility.
Sentiment & flows	Risk appetite and large institutional orders move prices regardless of fundamentals.

Volatility: friend and foe

Volatility measures how much and how fast a price moves. It is often sold as "opportunity", but it is equally a source of risk: the same swings that could help a position can destroy it, especially when leverage is involved. A realistic view treats volatility as something to manage, not to chase.

Next: risk management →