Micro Price Deviation

Quick Reference

Property	Value
Dimension	signal
Category	mean_reversion
Version	v1.0
Output Column	micro_price_deviation

Distance between mid-price and micro-price estimated from order book imbalance

Formula

mid_price - (((best_bid_price * best_ask_size) + (best_ask_price * best_bid_size)) / (best_bid_size + best_ask_size))

CDM Inputs

Column	CDM Table	Description
mid_price	cdm_lob_snapshot	Order book snapshot data 鈥?depth levels, bid/ask prices and sizes
best_bid_price	cdm_lob_snapshot	Order book snapshot data 鈥?depth levels, bid/ask prices and sizes
best_ask_price	cdm_lob_snapshot	Order book snapshot data 鈥?depth levels, bid/ask prices and sizes
best_bid_size	cdm_lob_snapshot	Order book snapshot data 鈥?depth levels, bid/ask prices and sizes
best_ask_size	cdm_lob_snapshot	Order book snapshot data 鈥?depth levels, bid/ask prices and sizes

Parameters

This FeatureType has no configurable parameters.

Output

Column: micro_price_deviation

Deviation of mid-price from weighted micro-price

Market Intuition & Trading Rationale

Micro-price deviation measures the gap between the simple mid-price and the depth-weighted micro-price: mid_price - weighted_micro_price. The micro-price adjusts the midpoint using bid/ask size asymmetry 鈥?when bid depth exceeds ask depth, the true equilibrium tilts above the mid-price. This deviation captures the error in using mid-price as a fair value estimate. Positive deviation means the mid-price overestimates fair value (selling pressure); negative means underestimates (buying pressure).

Usage Cases

• Fair value refinement: Use micro_price (not mid_price) as the reference for trade classification and execution decisions when micro_price_deviation is large. The simple mid-price is misleading in imbalanced books.
• Mean reversion signal: micro_price_deviation tends to mean-revert as the book rebalances. Trade in the direction of reversion 鈥?if mid > micro (positive deviation), sell; if mid < micro (negative), buy.
• context: Primary signal in microstructure_mean_reversion pack 鈥?deviation from micro-price is the core mean-reversion signal.

YAML Definition

name: micro_price_deviation
description: Distance between mid-price and micro-price estimated from order book
  imbalance
category: mean_reversion
dimension: signal
version: v0.9.0 (Beta)
required_inputs:
  - mid_price
  - best_bid_price
  - best_ask_price
  - best_bid_size
  - best_ask_size
output_column: micro_price_deviation
output_description: Deviation of mid-price from weighted micro-price
tags:
  - microstructure
  - mean_reversion
  - signal
parameters: {}
formula: mid_price - (((best_bid_price * best_ask_size) + (best_ask_price * best_bid_size))
  / (best_bid_size + best_ask_size))