Why did I not get the price I saw?Plain English

Because the number on the screen was one side of a two-sided market, and by the time your order arrived it was a description of the past.

3 min read · 556 words

Because the price you saw was probably not a price you could trade at. It was one of two, for a particular size, at a moment that had already passed by the time your order reached the market. None of that is a trick; it is what a quoted price is.

There are two prices, not one

A market quotes a bid — what somebody will pay you — and an ask or offer — what somebody will sell to you for. The single number shown in an app is usually the last trade, or the midpoint, and you cannot trade at either.

If the bid is 99.90 and the ask is 100.10, then buying costs 100.10 and selling raises 99.90. The 0.20 between them is the spread, and it is a real cost that appears on no statement, because it is inside the price rather than beside it.

The quote is for a size

"100.10" means 100.10 for the quantity being offered at that level. A larger order eats through that level and takes the next one, and the next. The average price of the whole order is worse than the price of its first share, and the difference grows with the size relative to what is available.

This is why a market order in something thinly traded is a different instrument from a market order in something heavily traded, even though both are the same instruction.

What your order type is actually asking for

• Market order: "fill me now, at whatever it costs." Certain execution, uncertain price.
• Limit order: "fill me at this price or better." Certain price, uncertain execution — including the case where the market runs away and you are never filled at all.
• Stop order: "when the price reaches X, send a market order." It is not a promise of X. It is a trigger that produces a market order, with everything above still true of it.

The third one is where most surprise concentrates. A stop at 90 in a market that gaps from 95 to 80 overnight becomes a market order at the open, and fills near 80. The stop worked exactly as specified.

Three more ordinary reasons

• Delay. The screen refreshes, the order travels, the venue queues. Milliseconds in a calm market; longer in a fast one, which is exactly when the price is moving most.
• You were not at the venue you thought. The same instrument trades in several places, and a broker routes. The price you saw may have been from a venue your order did not reach.
• The market was closed. An overnight price is not a tradeable price. Orders left overnight execute against the open, which is a different market from the one you were looking at.

What is worth checking, and what is not

Worth checking: the spread on the thing you are trading, whether the size you want is anywhere near the size on offer, and whether your order type says what you meant. All three are visible before you trade, which is what makes them the useful part.

Not worth relitigating: a fill a few pennies from the last trade in a liquid market. That is the spread, and it was there before you arrived. What liquidity costs is the page on why it exists and who is paid it.