Top of Book Is Only the Tip: Why Size Changes the Fill

[Shadow Trader]

Top of book shows only the best bid and best offer, along with the size available at those prices. Depth of book shows the further levels behind it, each with progressively worse prices. In spot forex there is no single central order book, so depth is always specific to a venue or an aggregator.

Retail platforms generally display a single streaming price. Behind that price, the broker's liquidity may be thin or deep, and the displayed quote may represent only a modest size. An order larger than the size at the top level walks the book, filling partly at the best price and partly at worse ones.

This explains why slippage rises with position size even when the spread looks unchanged. A tight spread describes the cost of the smallest trade, not of a larger one. During news or quiet hours, the gap between levels can widen sharply, so size that fills cleanly at midday may fill poorly in a thin session.

Scalpers testing a new broker can compare fills across different lot sizes at the same time of day. A consistent step in average fill price as size increases hints at limited depth behind the quote.

[FXS HongKong Scalper]

Worth stressing the point about no central book. When a retail platform shows one price, the size behind it is unknown, and for small tickets it rarely matters. Where we noticed it was on crosses in the Asian session: a 5 lot order on EURAUD at 07:00 Hong Kong time filled across several prices at one broker, with the average about 0.6 pips worse than the quote on screen.

Splitting the order into smaller pieces didn't help much, because the quote moved after the first fill. Trading those crosses later, when Europe is in, helped more than any order technique.