Terminology

What this video covers

• Why an investor instantly loses the bid-ask spread on a round-trip trade, and how perspective determines who pays the ask versus who receives the bid
• The speed-versus-control tradeoff: market orders guarantee execution but not price, limit orders guarantee price but not execution
• Where each order type sits on the market: buy limits and sell stops below the market, sell limits and buy stops above the market
• Why stop orders become market orders at trigger (no price protection), while stop-limit orders become limit orders (price protected but may not execute in a gap)
• Why short sales require a margin account: unlimited loss potential, dividend obligation to the lender, and the exam trap that cash accounts cannot hold short positions
• The freeriding violation in cash accounts: buying, selling, and using sale proceeds to fund the original purchase triggers a 90-day freeze requiring settled funds upfront
• How to distinguish principal trades (markup/markdown from inventory) from agency trades (commission for matchmaking), and why best execution still applies to payment for order flow