Micro-Price Analysis is a quantitative technique utilized in high-frequency trading to estimate the true, instantaneous fair value of a crypto asset. This is achieved by considering not only the best bid and ask prices but also the volume and density of orders within the immediate market depth.
Mechanism
This process involves calculating a weighted average of bids and asks, often assigning greater influence to orders closer to the mid-price or to larger volumes. This mathematical derivation provides a more sensitive and predictive price estimate than a simple mid-point calculation.
Methodology
The methodology seeks to predict short-term price movements and optimize order placement by offering a highly granular view of supply and demand imbalances within the order book. This precision improves decision-making for algorithmic execution and liquidity provision strategies.
Real-time market data integration into OMS/EMS systems fortifies execution quality by countering quote fade through predictive analytics and optimized routing.
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