What Is a ‘Book-to-Trade Ratio’ and What Does It Indicate about Market Dynamics?

The book-to-trade ratio compares the total volume of resting limit orders (the "book") to the volume of executed market orders (the "trades") over a given period. A high ratio indicates that there is ample liquidity relative to the trading volume, suggesting a stable market with low slippage risk.

A low ratio suggests high trading activity relative to the available liquidity, indicating a higher potential for volatility and slippage.