Bid and Offer Efficiency
Bid/offer volume ratios for reading market sentiment and aggressive participation
Calculates and plots efficiency ratios for bid and offer volumes over a configurable look-back period. Provides insights into market sentiment by analyzing the proportion of volume at bid vs. ask prices. A decreasing Bid Efficiency during a rising price suggests aggressive buying at the offer is driving the move. An increasing Offer Efficiency during a rising price indicates bullish sentiment through aggressive buying activity.
The Concept
This study measures the proportion of volume transacting at the bid versus the offer over a rolling period. By tracking these ratios as continuous lines, you can see shifts in market sentiment as they develop — rising offer efficiency indicates increasing aggressive buying, while rising bid efficiency indicates increasing aggressive selling.
How to Read It
Two lines track bid and offer efficiency ratios in a separate chart region.
- Rising Offer Efficiency means a growing share of volume is hitting the ask — bullish sentiment
- Rising Bid Efficiency means a growing share of volume is hitting the bid — bearish sentiment
- Crossovers between the two lines often coincide with sentiment shifts
- Divergence between efficiency trends and price direction warns of potential reversals
Practical Tips
The Look-Back Period smooths the ratios — shorter periods are noisier but more responsive, longer periods show established trends. Display in a separate chart region below price. Pair with delta studies for confirmation — efficiency shows the proportional split while delta shows the absolute difference.
Requirements
- Requires bid/ask volume data
- Displayed in a separate chart region (not overlaid on price)
Input & Settings
| No. | Input Name | Function |
|---|---|---|
| 1 | Look-Back Period | The number of bars used to smooth the bid and offer efficiency ratios. Default: 14. |
The number of bars used to smooth the bid and offer efficiency ratios. Default: 14.
Subgraphs
| No. | Subgraph Name | Function & Comments |
|---|---|---|
| 1 | Bid Efficiency | Proportion of bid volume to total volume, smoothed over the look-back period. |
| 2 | Offer Efficiency | Proportion of offer volume to total volume, smoothed over the look-back period. |
Proportion of bid volume to total volume, smoothed over the look-back period.
Proportion of offer volume to total volume, smoothed over the look-back period.
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