CPT CPT Market Structure & Order Flow

Question 1

What does 'market microstructure' primarily study in the context of professional trading?

Accepted Answer

The mechanics of how trades are executed, priced, and settled

Answer

The overall macroeconomic trends affecting markets

Answer

The long-term valuation of equity securities

Answer

The geopolitical factors influencing commodity prices

Question 2

In order flow analysis, what does a 'delta' reading on a footprint chart represent?

Accepted Answer

The net difference between aggressive buying volume and aggressive selling volume

Answer

The difference between the closing and opening price of a bar

Answer

The total number of trades executed at a price level

Answer

The spread between bid and ask prices at a given moment

Question 3

What is a 'market maker' primarily responsible for in equity and futures markets?

Accepted Answer

Providing continuous bid and ask quotes to ensure market liquidity

Answer

Setting regulatory margin requirements for retail traders

Answer

Executing large institutional block trades at favorable prices

Answer

Publishing official closing prices for listed securities

Question 4

Which order type guarantees execution but does NOT guarantee a specific price?

Accepted Answer

Market order

Answer

Limit order

Answer

Stop-limit order

Answer

Iceberg order

Question 5

What does 'price discovery' mean in financial markets?

Accepted Answer

The process of identifying the fair value of an asset through supply and demand interactions

Answer

The method brokers use to find the lowest commission rates

Answer

The technique traders use to locate hidden stop-loss orders

Answer

The regulatory process for approving new securities listings

Question 6

What is 'order book imbalance' and why do professional traders monitor it?

Accepted Answer

A significant difference between buy and sell orders at current price levels that may predict short-term price direction

Answer

A regulatory violation where a broker routes orders unfairly

Answer

A discrepancy in brokerage account statements requiring reconciliation

Answer

The gap between a trader's intended order size and actual executed volume