Price Improvement
Price improvement occurs when you execute at a better price than the currently displayed quote, often inside the spread.
Definition
Price improvement means executing at a better price than the displayed quote, often inside the bid ask spread. For example, executing below ask when entering a long position, or above bid when entering a short position.
Why it matters
Price improvement reduces execution cost and can materially change net edge in bounded markets. It often shows up as a lower effective spread.
Common pitfalls
Assuming improvement is guaranteed: Improvement depends on liquidity and order type.
Ignoring fees: A better fill can still be offset by trading fee.
Learn more
For execution examples, see EffectiveSpread.com.