Liquidity Imbalance Ratio

Quick Reference

Property	Value
Dimension	regime
Category	statistics
Version	v0.9.0 (Beta)
Output Column	liq_imbalance_ratio

Liquidity imbalance ratio: bid_liquidity / (ask_liquidity + epsilon) - relative availability of passive liquidity

Formula

bid_liquidity / (ask_liquidity + epsilon)

CDM Inputs

Column	CDM Table	Description
bid_liquidity	cdm_*	CDM source table
ask_liquidity	cdm_*	CDM source table

Parameters

Parameter	Type	Default	Description
epsilon	float [0.0, 1.0]	1e-10	Small constant to prevent division by zero

Output

Column: liq_imbalance_ratio

Ratio of bid-side to ask-side liquidity

Market Intuition & Trading Rationale

Liquidity imbalance ratio measures the relative availability of bid vs ask liquidity: bid_liquidity / (ask_liquidity + ε). Ratio > 1 means more passive buying interest than selling — bullish liquidity skew. Ratio < 1 means more passive selling interest — bearish skew. Ratio ≈ 1 means balanced liquidity. The epsilon prevents division by zero when one side has been completely pulled.

Usage Cases

• Directional liquidity bias: ratio > 1.5 → strong bid-side dominance (bullish). ratio < 0.67 → strong ask-side dominance (bearish). Trade in the direction of the skew — liquidity providers are positioning for a move.
• Execution side selection: For a buy order, prefer executing when ratio > 1 (more bid liquidity to absorb your sell). For a sell, prefer ratio < 1. Your passive orders face less competition when resting liquidity is abundant on the opposite side.
• Liquidity regime complement: Pair with liquidity_regime_classifier. Balanced ratio + tight spread = healthy market. Imbalanced ratio + tight spread = directional positioning. Imbalanced ratio + wide spread = stressed directional market.

YAML Definition

name: liquidity_imbalance_ratio
description: 'Liquidity imbalance ratio: bid_liquidity / (ask_liquidity + epsilon)
    - relative availability of passive liquidity'
category: statistics
version: v0.9.0 (Beta)
dimension: regime
status: Pre-release
required_inputs:
  - bid_liquidity
  - ask_liquidity
output_column: liq_imbalance_ratio
output_description: Ratio of bid-side to ask-side liquidity
parameters:
  epsilon:
    type: float
    description: Small constant to prevent division by zero
    required: false
    default: 1.0e-10
    constraints:
      min: 0.0
      max: 1.0
formula: bid_liquidity / (ask_liquidity + epsilon)