Order Book Data. The intentions sitting on the book.
The order book is every resting limit order at every price level. Depth on the bid side shows what buyers are willing to pay and in what size; depth on the ask side shows the same for sellers.
For automated trading it matters most as a cost question. The book determines how much slippage your order will actually pay, which is the difference between a backtest and a real fill.
Why depth decides whether a strategy is viable
A strategy that trades often is extremely sensitive to what it gives up on each round trip. If your order is large relative to the resting depth, you walk the book and get progressively worse prices. This is why a high-frequency strategy that looks profitable on paper can be unprofitable in practice, and why the same strategy behaves differently on a deep venue than on a thin one.
Order Book Data in a strategy
Depth at the touch tells you what crossing the spread will really cost at your size.
Heavily one-sided resting size can indicate short-term pressure in that direction.
Large resting orders are visible levels rather than lines drawn after the fact.
A strategy can cap its order size relative to available depth instead of a fixed number.
Size the order to the book instead of a fixed amount
Rather than a signal, this is a rule every active strategy should carry: it stops a good idea being destroyed by execution cost.
- IFSum the resting depth within 0.2% of mid price on the side you will have to cross
- ANDCap the order at 10% of that depth
- ANDEstimate slippage at that capped size and require it to be under 0.15%
- ANDIf the estimate fails, wait up to 60 seconds for depth to replenish before skipping the signal
A strategy trading fifty times a day at 0.3% slippage gives up 15% before it has made a decision, which is usually more than its edge. This rule is why the same strategy can be profitable on a deep venue and unprofitable on a thin one. Logging the skipped trades matters too: if a strategy is skipping constantly, the problem is that it is too large for the market it is trading, and no amount of tuning the entry will fix that.
Venues stream incremental order book updates, typically as a snapshot followed by a continuous diff feed.
A point-in-time view of the book to a given number of levels, useful for periodic checks rather than tick-by-tick work.
The executed trade feed shows what actually filled, which is the honest check on what the book promised.
Resting orders can be withdrawn instantly
A large visible order is an intention, not a commitment, and it can be cancelled the moment price approaches. Spoofing exists precisely because the book is easy to decorate. Treat depth as information about cost, which is reliable, more than as information about direction, which is not.
Let Order Book Data pull the trigger for you.
Your keys, your account, your rules. We only send the orders.
- Slippage estimation
- Imbalance
- Support and resistance that exists