Why it matters
Markout separates ‘good trade idea’ from ‘bad fill’. You can be right on direction and still bleed if your fills are systematically poor.
Trading use: the point is not vocabulary. The point is prediction: what changes when this shows up?
Common trap
Measuring execution by P&L alone. P&L mixes signal and execution; markout isolates execution quality.
Example
Over 100 entries, price tends to move against you immediately after fills, then later recover. Your signal might be fine, but your entry method is leaking edge.
Operational cue: if you can’t point to it on the chart, in the DOM, or in your broker logs, treat it as a story and trade smaller.
Notes
Quick rule
- If you see this repeatedly, you are in a different regime than your model assumes.
- Regime change usually means position size change.
- When in doubt: trade smaller, or don’t trade.