In a stock exchange where there is low volume overall , can a trading strategy based on the order book be effective ? Given that you have all the executions and the best five bids and asks. Any recommendations for a book on this subject
I would not be trading anything with low volume. You will find it hard to get the price you want to buy and to sell. There would usually be large price gaps and it is a sure way to lose money on every trade.
You are better off trading instruments with as high volume as possible - better chance of buying and selling at price you want and less change of price gaps.
There is an edge in low liquidity instruments simply because the biggest, most skilled traders in the marketplace might avoid these due to lack of liquidity. For a retail trader with a small account, the price movement is easier to read as the rate of price change is low. Many traders are only focusing on low liquidity instruments and do very well trading these while knowing they cannot compound their account significantly.