Market Microstructure Basics

CFA Level III: Trading and Market Microstructure · 3:49

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Lyrics

[Verse 1]
In the market where the money flows
There's a world that few people know
Behind each trade that you see today
Complex systems pave the way
Dealers making spreads so tight
Market makers day and night
Retail traders place their bets
While institutions hedge their nets

[Chorus]
Market micro, market structure
How the trades all come together
Bid and ask, the spread between
Order books and trading screens
Buy and sell, the dance goes on
From the night until the dawn
Market micro, learn it well
Every story trades will tell

[Verse 2]
Orders come in different types
Market orders, quick as light
Limit orders wait in line
At the price that you define
Stop loss orders guard your back
When the market starts to crack
Time in force will set the rules
These are trader's basic tools

[Chorus]
Market micro, market structure
How the trades all come together
Bid and ask, the spread between
Order books and trading screens
Buy and sell, the dance goes on
From the night until the dawn
Market micro, learn it well
Every story trades will tell

[Bridge]
Liquidity flows like a river
High volume makes prices quiver
When the spread is thin and narrow
Markets move straight as an arrow
But when liquidity runs dry
Spreads will widen, prices fly
Understanding this is key
To trade successfully

[Verse 3]
Electronic systems match each trade
Algorithms that never fade
Price discovery happens fast
Every second, first to last
Execution quality matters most
From coast to coast and post to post
Settlement follows T plus two
The cycle starts again anew

[Chorus]
Market micro, market structure
How the trades all come together
Bid and ask, the spread between
Order books and trading screens
Buy and sell, the dance goes on
From the night until the dawn
Market micro, learn it well
Every story trades will tell

[Outro]
Now you know the market's heart
Every player, every part
From the order to the trade
This is how the markets are made

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