Liquidity

Liquidity is how buyable or sellable an asset is. The thicker the book, the more size you can trade without moving price. Thin books make the same order more expensive through slippage.

Slippage

Slippage is the difference between the intended trade price and the actual trade price. This can directly be the result of a thin book; a market order can consume multiple price levels before it gets filled.

Below, the same buy of 5 contracts hits a thick book and a thin book. On the thick book the full size fills at the best offer, and on the thin book it consumes several levels, filling at worse prices.

Spread

The bid-offer spread is the first cost of crossing the market. Even before depth matters, a wider inside market means you pay more to get filled. Depth beyond the inside decides how far a larger order walks after that first tick.

Liquidity voids

A liquidity void is a stretch of the book with little or no resting size. When aggressive flow hits those levels, price can gap through them in a few trades. The thin book above is a small version of the same idea: missing size turns a routine order into a multi-tick move.

On a footprint, the same void shows up as price printing through several ticks with very little volume. The candle below moves 5 ticks on light prints in the middle of the range, the opposite of absorption where heavy trade stalls at a level.

Transient liquidity

Resting size is not fixed. Around economic releases, the open and close, and overnight sessions, traders often pull or thin their quotes. The book can look fine one minute and offer much less depth the next, so the same order size slips more when participation steps away.

Visible vs latent liquidity

What you see on the DOM is only the displayed book. Icebergs and other forms of stacking can absorb flow without showing full size up front. For how that absorption shows up in the book and on a footprint, see Absorption.

Measuring liquidity

Traders usually judge liquidity from a few simple book reads:

• Size at the best bid and best offer
• Cumulative depth within a fixed number of ticks
• How quickly size replenishes after it trades

Those measures change through the session. Comparing them before and after a release is often enough to see when the book has stepped away.

Further Reading

Absorption covers how resting liquidity can consume aggressive flow without moving price. For working with the ladder itself, see the DOM docs.