Thin market
Why can a moderate order move prices a long way when few participants are trading?
In plain words
A thin market has few active buyers and sellers, or little volume resting in the order book. With so few standing orders to absorb a trade, even a moderate order can push the price noticeably before it is filled.
Why it matters
Thin conditions widen the gap between the price you expect and the price you get, a difference called slippage. The same order that barely registers in a deep market can clear out several price levels in a thin one, so entry, exit and stop prices behave less predictably.
In a real week: BTC, week of 29 October 2018
In the week of 29 October 2018, BTC traded $0.46bn, a level labelled below its prior 12-week average. Within that week the range reached 4.48%, the largest one-hour move was 2.07% (Wednesday 31 October at 15:00 UTC), the worst day fell 2.24% (29 October) and the best day rose 1.53% (4 November), yet the week closed almost flat at -0.06%.
A common mistake
Reading thin trading as a strong directional signal. Low volume shows little participation, which cuts both ways; it can leave a market drifting as easily up as down.