Order Imbalance

Dictionary Says

Definition of 'Order Imbalance'

A situation resulting from an excess of buy or sell orders for a specific security on a trading exchange, making it impossible to match the buyers' and sellers' orders. For securities that are overseen by a market maker or specialist, shares may be brought in from a specified reserve to add liquidity, temporarily clearing out excess orders from the inventory so that the trading in the security can resume at an orderly level. Extreme cases of order imbalance may cause suspension of trading until the imbalance is resolved.


Investopedia Says

Investopedia explains 'Order Imbalance'

Order imbalances can often occur when major news hits a stock, such as an earnings release, change in guidance, or merger and acquisition activity. Imbalances can move securities to the upside or downside, but most imbalances get worked out within a few minutes or hours in one daily session. Smaller, less liquid securities can have imbalances that last longer than a single trading session because there are fewer shares in the hands of fewer people.

Investors can protect themselves against the volatile price changes that can arise from order imbalances by using limit orders when placing trades, rather than market orders.

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