The present invention provides market participants the ability to infer the current
internal state, i.e., the depth and activity of active buyers and sellers, in a
variety of markets, such as double-auction markets. The invention does so by measuring
certain averages and correlations of various indicators of market liquidity and
producing useful market liquidity assessments and trader recommendations as a result.
Various measures of market liquidity such as the bid-offer spread, the time
to mid-market trade, spread fluctuations, deal rate, and bid and offer size are
correlated, and monitored to assess a market's current internal state. From that
information, the relationship between fluctuations in the bid price and the average
number of buyers can be calculated to determine whether, for example, there is
an excess of buyers or sellers in the market. Accordingly, based upon such calculations,
accurate trader recommendations may be produced.
