Why is the limit book getting counter imbalanced on strong price move? - futures io
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Why is the limit book getting counter imbalanced on strong price move?


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Why is the limit book getting counter imbalanced on strong price move?

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  #1 (permalink)
 brakkar 
Paris + France
 
Experience: Advanced
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I notice this almost systematically: the stronger a move on NQ for example the more imbalanced the first 4 levels of the limit order book get.

For example, in case of a strong move up, the 4 closest ask levels will grow to over 60%+ and the 4 bids 40%-.

Why is that? I would have expected the exact opposite: on a strong move up, the ask levels getting unbalanced in favor of the bid levels. Why is the LOB getting thicker in front of strong move??

I have some hypothesis, but would first like to hear what you guys think.

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 chipwitch 
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brakkar View Post
I notice this almost systematically: the stronger a move on NQ for example the more imbalanced the first 4 levels of the limit order book get.

For example, in case of a strong move up, the 4 closest ask levels will grow to over 60%+ and the 4 bids 40%-.

Why is that? I would have expected the exact opposite: on a strong move up, the ask levels getting unbalanced in favor of the bid levels. Why is the LOB getting thicker in front of strong move??

I have some hypothesis, but would first like to hear what you guys think.

You said "limit order book" but I'm assuming you're talking about the depth map?

If so, that is usually an indication that the buyers are aggressively buying. They're hitting into the ask price levels deeper where there are already standing orders (resting orders) in place. Plus, the aggressive buying means that there has been very little time for new bid limit orders to accumulate (gain strength). Additionally, the sellers may be trying to defend a price point and aggressively stack limit orders in an attempt to inhibit the buying surge which sometimes succeeds, sometimes not.

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 bbking 
Boston, MA USA
 
Experience: Intermediate
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Trading: ES
 
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brakkar View Post
I notice this almost systematically: the stronger a move on NQ for example the more imbalanced the first 4 levels of the limit order book get.

For example, in case of a strong move up, the 4 closest ask levels will grow to over 60%+ and the 4 bids 40%-.

Why is that? I would have expected the exact opposite: on a strong move up, the ask levels getting unbalanced in favor of the bid levels. Why is the LOB getting thicker in front of strong move??

Just a guess, but it would appear that someone is trying to trick traders into selling into their (someone's) own buy programs. If the orders act like spoofed orders and disappear before an attempt at filling them, that would confirm it.

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Last Updated on June 13, 2022


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