Limit Order Count Ratio

Definition

The Limit Order Count Ratio measures the relative dominance of executed limit buy orders versus executed limit sell orders by comparing the difference in their counts against their combined total. It highlights the imbalance in the frequency of executed limit buy and sell orders, providing insight into liquidity absorption and market behavior.

$$\textbf{Limit Order Count Ratio} = \frac{\textbf{Limit Order Buy Count} - \textbf{Limit Order Sell Count}}{\textbf{Limit Order Buy Count} + \textbf{Limit Order Sell Count}}$$

Key Components:

• Limit Order Buy Count: The total number of executed limit buy orders during a specific timeframe (orders resting on the book, filled by market sell orders).

• Limit Order Sell Count: The total number of executed limit sell orders during a specific timeframe (orders resting on the book, filled by market buy orders).

• Ratio Range: The ratio is typically bounded between -1 and +1, where:

  • +1: 100% buy-side dominance (only limit buy orders were executed).

  • -1: 100% sell-side dominance (only limit sell orders were executed).

  • 0: Equal buy and sell limit order counts, indicating balance.