Order Execution Workbook

Your Turn (quick setup): Open a text editor or your trading notebook and create a one-page template titled Execution Readiness Checklist v1. You’ll fill it in during the exercise below so it becomes your default workflow.

Materials needed: - Your usual order ticket fields (symbol, side, size, venue, order type, time-in-force) - Your risk limits doc (even if it’s messy) - One live or paper trade you’ve been considering (pick a real one)

Time required: 25-35 minutes

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Guided Practice: Fill Out Your Checklist for One Real Order (and Get a Pass/Fail)

Here’s the hands-on part. You’re going to run one order through the checklist and end with a clear decision: PASS (send) or FAIL (fix and re-check). No hand-waving.

Your Turn (exercise): Build a readiness check for a single order).

1. Pick the order. Choose one trade you’d actually place today. Write these fields exactly as they’ll appear on the ticket: - Symbol: __________ - Side: ________ (Buy/Sell) - Size: ________ (shares/contracts/coins - whatever you trade) - Price reference: (last / mid / limit you intend): ________ - Planned order type + TIF: (e.g., Limit GTC, Market IOC, Stop-Limit day): __________

2. Set your liquidity threshold. Pick a rule you can measure quickly. Use one of these concrete defaults (or your own): - If limit order: require at least 2× your order size in visible book depth within the price band you’re willing to pay/receive (example: ±1 tick for a tight limit, ±0.10% for a looser one). - If market order: require that the estimated slippage stays under your max slippage (example: “I won’t accept worse than 3 bps vs mid”). Write your threshold in numbers: - Liquidity rule you’re using: ____________________________________ - Price band / slippage cap: ______________________________________

3. Verify liquidity at the venue you’ll route to. Look at the order book or your venue’s liquidity view and record: - Venue to route: __________ - Depth near your band (buy or sell side as relevant): ________ - Estimated slippage or fill probability proxy: __________

4. Confirm venue routing matches your plan. This is where people mess up - especially when they’re “just testing.” - Venue you’re actually sending to: __________ - Venue you intended to use: ________ - If different, note why you’re overriding: ____________________________

5. Order type behavior check (no vibes). For your chosen order type, fill in these: - Will it rest, take liquidity, or both? ____________________________ - Does it allow partial fills? (Yes/No) ________ - What happens if it doesn’t fill immediately? (cancel/expire/keep resting): __________

6. Run the risk check using your hard limits. You need numbers here. Use your real limits: - Max notional per order: __________ - Max loss per trade (or stop-defined max): ________ - Max daily loss / max drawdown kill-switch: ________ - Current exposure (open P&L or notional): __________

Then compute: - Order notional: __________ - Worst-case loss estimate (using your stop/limit assumptions): __________ - Result: PASS / FAIL (circle one)

7. Decide: PASS or FAIL. Your final decision is based on all four components: - Liquidity: PASS / FAIL - Venue: PASS / FAIL - Order type: PASS / FAIL - Risk: PASS / FAIL If any are FAIL, write the fix you’ll make (not later - right now): - Fix to apply (size/price/venue/order type): ___________________________

Completed example (sample filled-in checklist)

> Symbol: AAPL > Side: Buy > Size: 300 shares > Price reference: Mid-based limit at +0.02% > Planned order type + TIF: Limit GTC > Liquidity rule: Require at least 2× size in visible depth within ±1 tick band. > Liquidity check (Venue: NASDAQ): Visible sell depth at/near limit band: 700 shares. Depth passes (700 ≥ 600). > Venue routing: Intended NASDAQ (not EDGX). Ticket shows NASDAQ. PASS. > Order type behavior: Limit GTC rests; partial fills allowed; if it doesn’t fill, it stays working. > Risk limits: Max notional per order = $250,000. Max loss per trade = $1,000 (stop-defined). > Order notional: ~ $300 × $195.10 = $58,530 (under limit). > Worst-case loss estimate: $900 (within max). PASS. > Final decision: Liquidity PASS, Venue PASS, Order type PASS, Risk PASS → PASS (send).

If your numbers don’t line up, good - that’s the point. You now have a checklist that catches the exact failure mode you’d otherwise only notice after the fill.

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Real-World Application: Use the Checklist When Spreads Widen, Venues Change, and Stops Get Tricky

Now let’s make this stick in day-to-day trading instead of staying trapped in “workbook mode.” The trick is to apply the checklist at the moments that actually break execution: fast markets, routing changes, and order-type misunderstandings.

Scenario one: liquidity disappears right before you send. You’re placing a limit buy, and your usual depth check is “good enough.” Then the spread widens and the top-of-book thins. With your checklist, you re-check liquidity at the venue you’re routing to, and you force a measurable decision: either your required 2× depth is still there, or it isn’t. Expected outcome: if depth drops below threshold, you either (a) widen your price band (and re-check), (b) reduce size, or (c) switch from resting to a different order type you’ve already validated for behavior. No surprise fills at ugly prices.

Scenario two: venue mismatch because your platform auto-routes. You plan for one venue based on known liquidity, but the ticket silently routes elsewhere. Your checklist’s venue gate prevents you from sending a “correct order” to a “wrong market.” Expected outcome: if intended venue ≠ actual venue, your checklist forces a correction (explicit routing, or you re-run the liquidity check for the actual venue). This is especially useful when you’re building a trading system and your execution layer is abstracting venue details.

Scenario three: order type behavior doesn’t match your stop logic. You think “stop” means “I’m protected,” but your setup uses a stop-limit with a tight limit, and the market gaps through it. Your checklist forces the order type behavior check to be explicit: does your order rest, does it take liquidity, and what happens when it can’t fill? Expected outcome: you either adjust limit distance so it can actually fill in a gap, or you accept the risk and reflect it in the risk check. Either way, you remove the mismatch between intent and mechanics.

Apply It (micro-drill for your next trade): Before you submit, say out loud (or write one line) for each gate: - Liquidity: “Depth/slippage check is ____, so this is __.” - Venue: “Routing is __, matching intent __.” - Order type: “Behavior is __, partial fills __.” - Risk: “Notional/loss is __, kill-switch ____.”

If you can’t fill those four blanks in under 30 seconds, you’re not ready to send yet.

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Reflect: Lock in Your Checklist Decisions and Next-Step Fixes

You’ve built a pass/fail gate for the exact stuff that ruins execution. Now you need to turn that into a system habit - fast enough that it survives live trading stress.

Reflect 1: Which one gate do you expect to fail most often in your workflow (liquidity, venue, order type, or risk)? Write the specific reason tied to your trading style, not a generic answer. ________________________________________________ ______________________________________________ ________________________________________________

Reflect 2: For your chosen order, what single change would flip your decision from PASS to FAIL (or vice versa)? Give one concrete change: size, band, venue, or order type parameter. ________________________________________________ ______________________________________________ ________________________________________________

Reflect 3: What’s your next operational step to make this checklist usable every time (template into your trading system, a dropdown-based form, or a pre-trade “gate” button)? Write it as a concrete action with a finish line. ________________________________________________ ______________________________________________ ________________________________________________

When you’re done, keep one thing visible: the checklist is supposed to be boring. If it feels dramatic, you’re probably trying to trade without measuring the boring parts. Next, you’ll want to standardize the checklist so your execution workflow can’t “forget” it when things speed up.

End of chapter one. 6 more chapters in the full book.