I only have access to Level 1 quotes (best bid and ask) for some illiquid securities. Suppose I place a buy limit order on such a security based only on the Level 1 quotes. What are the risks I could face if I have no knowledge of the rest of the order book? How vulnerable will I be to adverse quote changes that I am unable to see?

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    I would point out (as I do often on this list) that trading thin stuff is a real art form. Also, it is misguided to think that "I can trade thin stuff if .. only I have XYZ!" (better data, more money, more news or whatever). That is really misguided. Even if one was a pit trader in an old-days non-electronic market, trading think stuff is an absolute nightmare. It's like moving from high school football to NFL football. Expect to get sacked to hospital. Of course, no-one ever listens to advice in this world - which is great, because I often get to say "told you so!" ;-)
    – Fattie
    Commented Oct 25, 2020 at 15:50
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    @Fattie - I echo your statement that it's misguided to believe that if you have better data, real time news or whatever that you can trade the thin stuff better. The edge comes from understanding the value of thin stuff and when to trade it. In a volatile market (2008, China tariffs implemented, March 2020, etc.), thin stuff becomes even more volatile than the market because orders on the order book are spread out and price jumps/drops erratically, often in chunks. It's not important to see the book but instead, price change. Commented Oct 25, 2020 at 16:14

1 Answer 1


A buy limit order is an order to purchase a security at or below a specified price. That guarantees that you pay no more than your limit price.

The only downside risk that you face is that your order is filled and the security's price then drops like a rock. However, that's investment risk and it that has nothing to do with the level of quotes that you have.

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