Methods of Trading

Chapter 5 follows the official CIRO Trader Exam syllabus element Methods of Trading. This domain carries 16 questions (~16%), so your study depth should reflect both its weighting and how often it drives scenario-based trading judgments.

The strongest exam answers in this chapter usually do two things well: they classify the situation correctly before choosing an action, and they connect the rule to the actual trading-desk consequence such as order handling, supervision, documentation, escalation, or post-trade control.

This chapter should be studied as execution design rather than as a vocabulary list. Order books, trading stages, durations, price instructions, crosses, minimum ticks, and designations all affect how an order interacts with the market. The stronger answer usually identifies which instruction actually drives the result before worrying about secondary order details.

Another recurring exam trap is to treat order types as if they only change client preference. In practice they also change exposure, timing risk, visibility, priority, and the likelihood that an order creates follow-up supervision or client-expectation problems. The best response usually matches the order instruction to both the trading objective and the market conditions.

Section Map

• 5.1 Understand the function of electronic order books
• 5.2 Understand the different trading stages and actions that can occur at those stages
• 5.3 Understand the relevance of order durations
• 5.4 Understand the relevance of price types
• 5.5 Different order types
• 5.6 Apply to specific situations different cross types
• 5.7 Apply to specific situations the minimum ticks rule
• 5.8 Order designations and identifiers
• 5.9 Understand the features of a block trade, including the impact on the order book
• 5.10 Understand market maker program and odd lot dealer system

Study Priority

• Official weighting: 16 questions (~16%)
• Learn the rule language, but spend most of your time on scenario translation: what changes on the desk, what must be documented, and what must be escalated.

In this section

• Function of electronic order books
  The function of electronic order books, including price discovery, order interaction, liquidity display, and matching mechanics
• Different trading stages and actions that can occur at those stages
  The different trading stages and actions that can occur at those stages, including opening, continuous trading, closing, and special states
• Relevance of order durations
  The relevance of order durations, including how time-in-force affects exposure, execution, and order management
• Relevance of price types
  The relevance of price types, including how different price instructions affect execution and order-book interaction
• Order types
  Different order types in specific situations, including buy, sell, sell-short, limit, on-stop or stop-loss, iceberg, post-only, anonymous, dark, bypass, and...
• Different cross types
  Different cross types in specific situations, including basis, VWAP, contingent, internal, bypass, derivative, client-principal crosses including guaranteed...
• Minimum ticks rule
  The minimum-ticks rule in specific situations
• Order designations and identifiers
  Order designations and identifiers and the implications of those designations in specific situations, including IA and SS markers, client identifiers and LEIs,...
• Features of a block trade, including the impact on the order book
  How block size changes liquidity, market impact, and the execution choices a trader can reasonably use.
• Market maker program and odd lot dealer system
  How market maker programs and odd-lot systems support liquidity, pricing continuity, and specific execution outcomes.