Order Types and Their Impact on Price

Every order on the exchange is a choice between two trade-offs: guaranteed execution or price control. Understanding these trade-offs is the key to reading order flow.

Futures Essentials

Volume analysis works best where every trade is visible. CME futures are the gold standard: one exchange, all data available to all participants.

Tick Size and Value

A tick is the minimum price increment. Each instrument has its own:

Instrument	Tick	Tick Value
ES (E-mini S&P 500)	0.25 points	$12.50
NQ (E-mini Nasdaq)	0.25 points	$5.00
CL (WTI Crude Oil)	$0.01	$10.00

"ES moved 10 ticks" = $125 per contract.

Continuous Contract

Every futures contract expires. ES does so quarterly: March, June, September, December. A few days before expiration, liquidity migrates to the next contract -- the rollover. For analysis, traders use a continuous contract -- a "stitched" series of consecutive contracts forming an unbroken data feed.

Market Order: "Walk Up and Take It"

The buyer walks up and takes the goods at the current price. No haggling. Takes what is available. A market order moves price when its size exceeds the liquidity at best bid/ask.

The trade-off: execution is guaranteed, price is not. On a liquid market, slippage is one tick. On a thin market, price can slip 5-10 ticks -- that is slippage.

Limit Order: "Set the Price and Wait"

The seller set a price tag and sits. He will not go to the buyer -- he waits for buyers to come to him. A limit order creates liquidity -- "goods on the counter." It does not move price by itself.

The opposite trade-off: price is guaranteed, execution is not. You know the price you will get if the market reaches you. But it might not.

Stop Order: "The Alarm Went Off -- Run and Buy"

The buyer sits in a cafe across the street. He left an assistant with instructions: "If the price reaches 105 -- run and buy, whatever it costs." This is a stop order. While price is below 105, nothing happens. Once it hits -- the assistant runs and buys at market.

A stop order turns into a market order when triggered. And like any market order, it moves price. This is why stop cascades are so powerful: when price reaches a cluster of stop orders, they all convert to market orders simultaneously. A wave of market orders eats through liquidity level by level.

Example. ES consolidates between 5520 and 5525. Below 5520, stop-losses of long positions accumulate. Price breaks 5520 -- stops convert to sell market orders. The flood of market sells hammers the bid. Price drops 3-4 ticks in one second. The footprint shows massive volume on the bid side. This is not "sellers deciding to sell" -- it is a stop cascade.

Stop-Limit Order: "The Alarm Went Off, but Set a Price"

Same assistant, different instruction: "If the price reaches 105 -- set a price tag at 105.50 and wait." A stop-limit turns into a limit order when triggered, not a market order. If price blew past too quickly, the limit just hangs in the book unfilled.

On fast markets (news releases, session opens), a stop-limit may fail: price jumped past the limit in a single tick.