Measuring market noise

Last week, US stock exchange NASDAQ unveiled NASDAQ Market Velocity, a real time product that detects the level of market activity in NASDAQ stocks and alerts traders to events before they appear in price and volume information.

Market Velocity provides a technology version of market noise and activity levels found on a physical trading floor. The information is available simultaneously to all investors, not just to those physically present on a floor-based market. Market Velocity indicates the level of market activity in individual NASDAQ stocks by measuring the frequency and share volume in aggressively priced orders. It can indicate changes in market direction, momentum or liquidity in each stock, enabling users to imply future price movements and trends.

Select traders with access to a physical trading floor have historically detected changes in these levels on the floor via increased noise levels or visual indications such as individuals gathering in a particular location. These sensory cues could be used to detect trends, enabling the trader to capitalize on price movements before they happen.

Source: NASDAQ


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