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2006issue C071-3

Order-book depth and passive flow for execution

The inside quote and volume-weighted average price record what already printed. Order-book depth lists standing buy and sell size that can still be reached, including passive order flow that is inserted or pulled without a fill.

  • The best bid and ask omit standing interest away from the inside, so they are an incomplete map of nearby executable size.
  • A print that hits the bid is a sell and a print that hits the ask is a buy; volume-weighted average price condenses those completed transactions.
  • Passive order flow is unexecuted interest waiting to be hit, and it changes when a bid or offer is inserted or pulled without a fill.
  • Full-depth flow can show size entering and leaving beyond the touch, exposing liquidity that last-sale and inside-quote screens do not show.
Entries in this reading3 entries
Current trackOrder book depth7 readingsVolume-weighted average price21 readingsOrder flow analysis22 readings

The layer beneath the inside quote

The inside quote is the current best displayed bid and offer, and it shows only the top of the book. Best bid and ask omit standing interest away from the inside, so they are an incomplete map of nearby executable size.

A depth-of-book view lists outstanding buy and sell orders that can be reached, which is the information layer beneath the inside quote. Order-book depth is that roster of standing buy and sell size at and away from the inside during the life of an order.

What a print already settled

A print that hits the bid is a sell and a print that hits the ask is a buy. Those trade-weighted transactions are what a volume-weighted average price condenses.

An aggressive order takes displayed size and prints a trade against the bid or the offer. Volume-weighted average price is a trade-weighted average of printed volume that summarizes completed transactions rather than resting interest.

Unexecuted interest still on the book

Passive order flow is unexecuted interest waiting to be hit, and it changes when a bid or offer is inserted or pulled without a fill.

Full-depth flow can show order size entering and leaving beyond the touch, exposing liquidity that last-sale and inside-quote screens do not show. A liquidity pool is a concentration of standing size away from the inside that can absorb or resist incoming flow.

MSFT standing size still working on each TotalView price

A trader deciding whether to rest, take, or wait on Microsoft faces a thin 27.93 bid under a much heavier 27.94 offer, with another fifty thousand shares still parked at 27.92 and similar size on the next two offers. Each bar adds the SIZE printed on that price’s rows in the ADVFN NASDAQ TotalView ladder — unexecuted interest, not the tape that already printed.
A trader deciding whether to rest, take, or wait on Microsoft faces a thin 27.93 bid under a much heavier 27.94 offer, with another fifty thousand shares still parked at 27.92 and similar size on the next two offers. Each bar adds the SIZE printed on that price’s rows in the ADVFN NASDAQ TotalView ladder — unexecuted interest, not the tape that already printed.NASDAQ:MSFT · intraday book snapshot · 2006-01-30T00:00:00.000Z to 2006-01-30T00:00:00.000Z

Only the visible ladder rows are summed. The screen’s inside strip printed 4,500 bid and 63,300 offered, a few hundred shares off these row totals, and the 5% header filters may hide additional size. Book stamps run 15:04–15:13; the quote strip reads 15:45.

How a falling offer was read

On a falling stock, small aggressive size hitting the offer while price keeps dropping was treated as continued weakness. Offers being taken without further downside was treated as a level starting to form.

Fast-market supply and demand is read from how resting bids and offers build or collapse against aggressive taking, an interaction barely visible on the inside or on a price chart.

Rest, take, or wait against the standing book

Implementation cost is the fill quality and slippage that depend on whether an order rests, takes, or chases given the book that actually exists.

Editorial: after the inside quote and volume-weighted average price are treated as a record of completed trade, the remaining job is to choose whether the next order rests, takes, or waits for the passive order flow and liquidity pools that are still waiting to be hit.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
3 of 7 in the Order book depth track
20081-2 pp.Next on Order book depthDepth, close imbalances, and pairs on one clockDisplayed depth and last-trade prints are read together so an order can sit where it is executable and can join a depth sweep rather than chase quote flicker.
All readings on this track · 7 readings
  1. 1991Testing dealer inventory caps against a frozen order tape
  2. 2003Cheaper access still left a routing and cost problem
  3. 2006Order-book depth and passive flow for execution
  4. 2008Depth, close imbalances, and pairs on one clock
  5. 2012Checklist exits and the limits of visible book depth
  6. 2013Constructing forex orders from provider imbalance and book depth
  7. 2017Ladder, trail, and average as one execution ticket
By fieldOrder types and routing87 readingsBy year2006150 readings
All 7 readings tagged Order book depth
Also on Order book depth5 readings
2013Constructing forex orders from provider imbalance and book depth1991Testing dealer inventory caps against a frozen order tape2003Cheaper access still left a routing and cost problem2008Depth, close imbalances, and pairs on one clock2012Checklist exits and the limits of visible book depth