Have you ever stared at a trading chart, watching prices wiggle up and down, and wondered: what is actually moving this market?

Is it news, “smart money,” or a complex algorithm running somewhere across the globe? The answer is all of the above—but all of it flows through one central concept: market structure.

New traders often jump straight into indicators and patterns, trying to read signals without understanding the fundamentals. Professionals, on the other hand, start with the engine: they learn how prices are formed, who sets them, what happens when orders are executed, and the hidden costs that can erode profits.

Understanding market structure isn’t academic—it’s essential for survival and success. It transforms you from a market tourist into a confident navigator.

In this MEXQuick Review, we break down the mechanics of pricing, spreads, leverage, liquidity, and broker models, giving you actionable insights to trade smarter, manage risk, and protect your capital.

Bid, Ask, and Spread: The True Cost of a Trade

Every market operates on a two-price system: the bid and the ask.

  • Bid Price: The price the market will pay to buy from you (your sell price).

  • Ask Price: The price the market will sell to you (your buy price).

The spread—the difference between bid and ask—is effectively the broker’s fee. If Apple trades at Bid: $150.00 / Ask: $150.02, you need the price to rise beyond $150.02 to make a profit. Understanding spreads is crucial for short-term traders, as wide spreads can erode gains.

Tight spreads appear in highly liquid markets like major Forex pairs or large-cap stocks, ideal for scalping or day trading.
Wide spreads occur in low-liquidity markets or off-hours, increasing costs and risk.

Pro Tip: Always check the spread before entering a trade, and avoid low-liquidity instruments during high-impact events.

Leverage and Margin: The Double-Edged Sword

Leverage amplifies both profits and losses by allowing you to control larger positions with borrowed capital.

Example:

  • $1,000 account with 10:1 leverage → control $10,000 worth of assets.

  • Price moves 10% up → $1,000 gain (100% return).

  • Price moves 10% down → total loss of initial capital.

Margin is your collateral:

  • Margin Requirement: Your initial deposit to open a position.

  • Maintenance Margin: Minimum equity required; falling below triggers a Margin Call, possibly leading to forced liquidation.

Pro Tip: Use leverage cautiously, always set stop-loss orders, and never risk more than you can afford to lose.

Pip and Lot Size Calculations

Risk management depends on understanding pips and lots.

  • Pip: Standard measure of price movement (e.g., 0.0001 in EUR/USD).

  • Lot Sizes:

    • Standard Lot: 100,000 units

    • Mini Lot: 10,000 units

    • Micro Lot: 1,000 units

Example: $2,000 account, risk 1% ($20), stop-loss 20 pips → 1 mini lot for proper position sizing.

Pro Tip: Master pip and lot calculations to ensure survivable losses and controlled risk.

Price Formation and Liquidity Flow

Market prices are determined by supply and demand in a continuous global auction.

  • Liquidity Providers (LPs): Banks, institutions, and hedge funds supplying market depth.

  • Order Flow: Real-time record of buy and sell orders, revealing support and resistance zones.

High Liquidity: Tight spreads, smooth price movement (major Forex pairs, large-cap stocks).
Low Liquidity: Wide spreads, potential gaps and volatility (small-cap stocks, exotic currencies).

Pro Tip: Understand liquidity before trading to avoid extreme volatility risks.

Market Execution vs Pending Orders

Order types define risk and fill price:

  • Market Order: Immediate execution, subject to slippage.

  • Limit Order: Executes at a specific price or better, no slippage.

  • Stop Order: Becomes market order when a price is reached, useful for stop-losses and breakout trades.

Pro Tip: Use market orders for speed, limit orders for precision, and stop orders for risk control.

Volatility and Spread Impact

Volatility measures the rate of price changes.

  • High volatility → bigger profit potential but larger risk.

  • Spreads widen during major news or market openings, increasing execution costs.

Pro Tip: Avoid trading during major news unless using a news-specific strategy, widen stop-losses in volatile markets, and reduce position size accordingly.

Market Depth: Seeing Beyond the Surface

The order book shows all pending buy (bids) and sell (asks) orders. Large resting orders indicate potential support or resistance levels.

Pro Tip: Market depth is vital for large trades or low-liquidity assets, helping you anticipate price reactions.

Broker Models: STP, ECN, and Market Makers

Understanding broker models affects trading outcomes:

  • STP (Straight Through Processing): Orders routed directly to liquidity providers; broker earns from spread. No conflict of interest.

  • ECN (Electronic Communication Network): Direct marketplace with raw spreads; commissions apply. Tightest spreads.

  • MM (Market Maker): Broker acts as counterparty; fixed spreads but potential conflict of interest.

Pro Tip: Match your broker type to your strategy: ECN for scalpers, MM for beginners, STP for balanced transparency and cost.

Conclusion: The Trader’s Blueprint

This MEXQuick Review shows that understanding market structure and pricing is foundational for all traders. It enables you to:

  • Calculate true risk with pip and lot sizing

  • Select the right order type

  • Navigate volatile markets

  • Choose the right broker

Trading is no longer guessing—it’s strategy. Respect spreads, manage leverage, and master your orders.

Apply these principles, review your trading plan, analyze your broker, and protect your investments. Mastering market structure is the first step to professional trading success.