Bid & Ask Cumulative Delta

Definition

Bid & Ask Cumulative Delta tracks the cumulative difference between resting buy (bid) and sell (ask) orders on the order book over a specific timeframe. It measures the net liquidity imbalance between passive buy and sell orders, offering insight into the supply and demand dynamics waiting to be executed.

Key Concept:

  • Bid Liquidity: The total volume of passive buy (bid) orders resting in the order book.

  • Ask Liquidity: The total volume of passive sell (ask) orders resting in the order book.

  • Delta: The difference between bid liquidity and ask liquidity at each point in time.

  • Cumulative Delta: The running total (cumulative sum) of these differences over time.

Cumulative Delta=∑(Bid Liquidity−Ask Liquidity)

Depth Parameters:

The Bid & Ask Cumulative Delta is analyzed across various order book depth levels, each representing a range of liquidity from the mid-price:

  • Quote: Best bid and ask prices.

  • 1% Depth: Orders within 1% of the mid-price.

  • 2% Depth: Orders within 2% of the mid-price.

  • 5% Depth: Orders within 5% of the mid-price.

  • 10% Depth: Orders within 10% of the mid-price.

  • 20% Depth: Orders within 20% of the mid-price.

  • Full Book: All visible liquidity across the entire order book.

Each depth level provides a unique perspective on liquidity concentration and imbalance, offering clarity on market sentiment across varying price ranges.

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