Thin Market
A thin market has low liquidity, meaning limited depth and often wide spreads. Small orders can move price and executions can be unreliable.
Definition
A thin market is a market with low liquidity. It typically has limited market depth, fewer active orders in the order book, and higher execution costs.
Why it matters
Thin markets make it hard to trade at expected prices. They increase the chance of partial fills, slippage, and large effective spreads.
Typical symptoms
• Wide bid ask spreads.
• Very low depth at the best bid or ask.
• Large price moves from small orders.
Common pitfalls
Trusting the top of book: In thin markets, the best bid and ask might not be there by the time you click.
Overtrading size: Trading too large relative to depth creates self inflicted costs.