Depth makes the price you pay
A market order consumes resting orders from best to worst until your size is filled. If the best offer covers your whole size you fill at one price; if it does not, the fill walks to the next level and the next — which is slippage in its mechanical definition rather than as bad luck.
So liquidity is not a vague property of a market but a number: how much size rests near the current price. When those orders withdraw on a news release the spread widens because the next level in the book is further away — not because someone decided to widen it.
Cost measured against risk
Execution quality is not a technical detail but a cost line measured in dollars. The same reference account the cost family uses: 0.10 lots of gold at 2,400, where $1 of price is $10 of money, and 1% of a $1,000 account is $10.
On that scale every execution cost is directly comparable with the spread, slippage and swap already published — and the only question that matters is how much of the risk budget it consumes before price moves at all.
A worked example
To buy 0.10 lots of gold (10 ounces) at 2,400, suppose the book shows 6 ounces at 2,400.30 and 4 at 2,400.50.
The fill takes both slices: average price = (6 × 2,400.30 + 4 × 2,400.50) ÷ 10 = 2,400.38. You paid 8 cents above the best offer — $0.80 on 10 ounces, or 8% of a $10 risk budget, from a single extra level in the book.
Common mistakes with this term
- Assuming the quoted price covers any size, when it is the best price for a limited quantity only.
- Reading a widening spread as a broker decision, when it reflects the book's depth at that moment.