medium · Order Flow Analysis market-mechanics-execution
Markets often exhibit asymmetric price movement, falling significantly faster than they rise.
What internal order flow mechanic is primarily responsible for the rapid acceleration of a selloff?
- The hollowing out of the bid side as market makers withdraw liquidity, combined with long stop-loss market orders.
- Higher transaction costs for short positions, forcing sellers to execute larger blocks to maintain profitability.
- An increase in passive sell limit orders at successively lower prices, creating a 'weight' on the market.
- The psychological effect of the previous day's close acting as a magnet for institutional rebalancing.
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