THIN MARKET

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A thin market is a market with a  low number of buyers and sellers or it is a stock market situation where there are few bids to buy and few offers to sell.
Prices tend to be more volatile as assets tend to be less liquid in a thin market since there are small number of buyers and sellers thus resulting in a low transaction volume.

Thin securities market is characterized by few bids to buy and few offers to sell, low level of liquidity, wide spread in bid and asked prices and highly volatile price. Thin market may apply to a single security or to the entire stock market.

Significance of a thin market is that its participants need to have the financial resources to effectively absorb sudden price shocks associated with high volatility, which means that the associated risk may work in the favour of its participants and ultimately result in sudden gains.

Investdata Academy

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