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How Does the Concept of ‘Order Book Imbalance’ Relate to HFT and Potential Price Movement?

OBI is the buy/sell volume ratio; HFTs react to imbalance by moving price or withdrawing liquidity, causing slippage.
Greeks.Live10.11.25

How Does the Concept of ‘Order Book Imbalance’ Relate to HFT and Potential Price Movement?

Order book imbalance (OBI) is the ratio of buy volume to sell volume on one side of the order book near the best price. HFT algorithms constantly monitor OBI.

A significant imbalance suggests a strong directional pressure, leading HFTs to anticipate a price move. They may then quickly withdraw liquidity on the weaker side, widening the spread, or aggressively trade on the stronger side, causing a price move.

This reaction can lead to slippage for slower market participants.

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