Source-aware field guide · 20 answers
Order Flow and Liquidity Analysis
A practical glossary for volume, trade-flow and liquidity labels used in execution analysis and discretionary trading.
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How to use this guide
A practical glossary for volume, trade-flow and liquidity labels used in execution analysis and discretionary trading. The guide is written for execution analysts, traders, dealing teams and market-data engineers. The collection explains what can be observed from trades, quotes and position data while distinguishing measurement from inferred participant intent.
Use every answer to resolve one operational question: Which feed and classification rule produced the order-flow observation, and is the conclusion observable or inferred? Retail feeds may show only part of a market. Aggressor classification, volume type and venue coverage must be stated before comparing results.
The supporting set is Investor.gov — Types of orders; FIX Trading Community — Standards; MetaTrader 5 Help — Technical indicators. These links provide standards, regulator material or official product documentation for the subject; they do not imply endorsement, worldwide applicability or a verified feature in a particular deployment. Check the current source, contract, configuration and qualified local advice before a production, trading or compliance decision.
What Is a Liquidity Sweep?
A liquidity sweep is a descriptive label for price trading through a prior level or cluster of interest and then reacting, under a declared sequence rule.
- Use it to
- Define the reference level, penetration, time window and reaction threshold.
- Check the boundary
- The chart does not prove which resting orders existed or why price reversed.
What Is a Stop Run?
A stop run is an inference that triggered stop orders contributed to rapid trading through a visible level, usually based on price and flow observations.
- Use it to
- Separate observed prints and volatility from the unobservable intent attributed to participants.
- Check the boundary
- Without venue-level order data the cause and order types may remain unknown.
What Is Order-Flow Absorption?
Absorption describes heavy marketable trading at or near a level without a proportionate price move, suggesting opposing resting interest in the observed feed.
- Use it to
- Measure traded volume, price response, venue coverage and duration.
- Check the boundary
- Hidden liquidity, replenishment and unrelated flow can produce similar observations.
What Is Order-Flow Exhaustion?
Exhaustion describes declining follow-through or participation after directional activity, using specified price, volume or delta criteria.
- Use it to
- Define the compared windows, minimum activity and reversal or pause condition.
- Check the boundary
- Lower volume can reflect session timing or missing data rather than exhausted demand.
What Is Volume Delta?
Volume delta subtracts seller-initiated volume from buyer-initiated volume, or vice versa, under a chosen aggressor-classification method.
- Use it to
- Verify trade classification, venue set, corrections and aggregation interval.
- Check the boundary
- Quote-based inference can misclassify trades and sign conventions differ.
What Is Cumulative Delta?
Cumulative delta adds successive volume-delta observations from a selected reset point to show the path of classified aggressive flow.
- Use it to
- Record the reset, classification algorithm, missing data and corrections.
- Check the boundary
- The starting point is arbitrary and divergence does not guarantee price reversal.
What Is a Volume Profile?
A volume profile allocates observed trading volume across price intervals for a chosen market, feed and time window.
- Use it to
- Define tick aggregation, price buckets, session and venue coverage.
- Check the boundary
- OTC tick volume and centralized traded volume are not interchangeable.
What Is a Footprint Chart?
A footprint chart displays classified traded volume or related statistics within individual price levels of each bar.
- Use it to
- Verify bid-ask classification, bar construction, feed coverage and color thresholds.
- Check the boundary
- Visual imbalance can be created by settings and incomplete venue data.
What Is an Order-Flow Imbalance?
An order-flow imbalance compares selected buy-side and sell-side quantities at a price or interval using a declared formula and threshold.
- Use it to
- State whether the comparison uses quotes, trades, diagonals, ratios or differences.
- Check the boundary
- Different imbalance formulas can assign opposite labels to the same data.
What Is Bid and Ask Volume?
Bid and ask volume may refer to displayed quote size or to trades classified as occurring against bid or ask liquidity, depending on the data product.
- Use it to
- Identify whether the field represents resting quotes or executed trades.
- Check the boundary
- Using one meaning while explaining the other produces invalid conclusions.
What Is Open Interest?
Open interest is the number of outstanding derivative contracts under the venue's counting and publication rules, changing as positions are opened and closed.
- Use it to
- Align publication time, contract, adjustment and expiry when comparing the series.
- Check the boundary
- Open interest is not trading volume and does not directly reveal trader direction.
What Is Tape Reading?
Tape reading is the analysis of time-and-sales and related quote changes to interpret short-term trading activity under a chosen framework.
- Use it to
- Retain the raw feed, filters, timestamps and observations behind an interpretation.
- Check the boundary
- Modern fragmented markets and aggregation can hide activity outside the viewed tape.
What Is Time and Sales?
Time and sales is a chronological record of reported trades with fields such as time, price, quantity and venue or condition when available.
- Use it to
- Validate timestamps, corrections, trade conditions and sorting before analysis.
- Check the boundary
- Late reports and bundled prints can distort the apparent sequence.
What Is an Iceberg Order?
An iceberg order exposes only part of a larger order while replenishing displayed quantity according to venue rules.
- Use it to
- Distinguish a supported order type from an inference based on repeated fills.
- Check the boundary
- Replenishment patterns can have other causes and hidden size may remain unknowable.
What Is Spoofing?
Spoofing generally refers to placing orders with intent to cancel before execution in order to mislead other market participants, as defined by applicable law and enforcement context.
- Use it to
- Escalate suspicious patterns with raw messages, timestamps and legal review.
- Check the boundary
- Cancellation frequency alone does not prove intent and accusations require due process.
What Is Wash Trading?
Wash trading generally involves transactions that create a misleading appearance of market activity without meaningful change in beneficial ownership or market risk, subject to applicable rules.
- Use it to
- Preserve account links, orders, fills and ownership evidence for qualified review.
- Check the boundary
- Similar-price opposing trades do not alone establish coordination or unlawful intent.
What Is Thin Liquidity?
Thin liquidity describes conditions in which executable quantity is limited, spreads are wider or modest orders can move price materially.
- Use it to
- Measure depth, spread, impact and fill outcomes for a stated order size and time.
- Check the boundary
- One displayed snapshot can change before an order arrives.
What Is a Liquidity Pool?
A liquidity pool is a source or grouping of executable interest made available under a venue, provider or routing arrangement.
- Use it to
- Identify contributors, access terms, instruments, pricing, capacity and execution rules.
- Check the boundary
- The phrase is also used in decentralized finance and should not be mixed without context.
What Is Order-Flow Divergence?
Order-flow divergence is a descriptive mismatch between price movement and a selected flow measure such as cumulative delta over a defined window.
- Use it to
- Specify both series, reset point, alignment and divergence threshold.
- Check the boundary
- Data gaps, classification error and different venue coverage can create a false mismatch.
What Is Auction Market Theory?
Auction market theory is a framework that interprets markets as price-discovery processes balancing buyers and sellers through changing participation and acceptance.
- Use it to
- Translate qualitative ideas into declared profile, range or time observations.
- Check the boundary
- It is an analytical framework rather than a standardized predictive formula.
Primary and official references
These sources establish definitions, standards or official product behavior used across this guide. Follow the exact source and check its current version before a live implementation.