Forecasting Short-Horizon Market Order Liquidity Consumption

Summary

The document poses a market microstructure research question: how to predict the number of shares bought or sold by liquidity-taking traders over a short time interval. It defines liquidity consumers as traders using market orders and asks about models for forecasting their aggregate activity in a stock’s limit order book.

The author suggests that the rate of market-order selling might rise with the steepness of a downward price trend, then asks for correction or alternatives. No answer, forecasting method, empirical evidence, or validation is included. The proposed relationship is therefore only a hypothesis; the document does not establish whether price trend slope predicts market-order volume, or whether any relationship would hold across assets and time intervals.

Key ideas

• Liquidity consumption is framed as market-order buying or selling over a short interval.
• The research target is aggregate share volume initiated by liquidity consumers.
• The author hypothesizes that selling intensity may increase with the steepness of a falling price trend.
• No model, data, or evidence is provided to evaluate that hypothesis.

Tags

# Methods of predicting liquidity consumption


# Methods of predicting liquidity consumption












Let's consider limit order book for a certain stock. By liquidity consumers i mean traders that buy/sell shares using market orders.

> What are the known methods/models for predicting total amount of shares that are going to be sold by liquidity consumers in a small time interval?

I have a intutition that this ratio (number of shares divided by time interval) is positively correlated to slope of price trend i.e. the more steep is the downward line the more liquidity consumers sell. Please correct me if i am wrong.

Regards.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.