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 does 'market microstructure' primarily study in the context of professional trading?
Answer: The mechanics of how trades are executed, priced, and settled
Market microstructure focuses on the mechanisms and rules governing how buy and sell orders are translated into actual trades and prices.
In order flow analysis, what does a 'delta' reading on a footprint chart represent?
Answer: The net difference between aggressive buying volume and aggressive selling volume
Delta on a footprint chart shows the net buy volume minus net sell volume, indicating whether buyers or sellers were more aggressive.
What is a 'market maker' primarily responsible for in equity and futures markets?
Answer: Providing continuous bid and ask quotes to ensure market liquidity
Market makers post continuous two-sided quotes (bid and ask), earning the spread while ensuring traders can buy or sell at any time.
Which order type guarantees execution but does NOT guarantee a specific price?
Answer: Market order
A market order executes immediately at the best available price, guaranteeing fill but not the exact execution price.
What does 'price discovery' mean in financial markets?
Answer: The process of identifying the fair value of an asset through supply and demand interactions
Price discovery is the continuous process by which buyer and seller interactions in a market determine the current fair value of an asset.
What is 'order book imbalance' and why do professional traders monitor it?
Answer: A significant difference between buy and sell orders at current price levels that may predict short-term price direction
Order book imbalance occurs when there are significantly more buy orders than sell orders (or vice versa), often signaling short-term directional pressure.