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Cont, Kukanov & Stoikov (2010) show short-horizon mid moves track order-flow imbalance roughly linearly, with slope inverse to depth. Plain-language intro. Not investment advice.
Takeaway. Over short horizons, mid-price moves track order-flow imbalance (OFI) roughly linearly—and the slope shrinks when the book is deeper.
The Price Impact of Order Book Events (Rama Cont, Arseniy Kukanov, Sasha Stoikov, 2010/2014) is a classic after-work microstructure paper: it turns “who hit the book?” into a simple, testable feature.
Fit for learners: Shows short-horizon price changes are driven linearly by order-flow imbalance with slope inverse to depth.
This Hub note is a plain-language intro. Not investment advice. Pair with LOB survey and square-root impact.
Trade signs alone are noisy. You need a clean summary of how market and limit orders reshape the top of book—and how that reshaping relates to the next mid tick—without diving into a full multi-level simulator on night one.
Read the PDF for formal definitions and empirical plots; blogs often rename OFI casually—check against the paper when coding.
OFI is one of the first LOB features that feels buildable: event timestamps → signed size changes → a series → a scatter vs Δmid. Perfect once you can groupby and plot.
Tiny evening exercise: invent a toy timeline of best-bid/ask sizes; compute a simple OFI proxy between mid changes; scatter OFI vs Δmid and eyeball slope for “thin” vs “thick” books—learning only, no live feed.
Landing: arXiv abs
Not investment advice. This Hub note is educational only. Cont–Kukanov–Stoikov is research—not a signal, bot, or permission to trade with real capital.
Single course CTA: SoloQuant Academy’s Introduction to Python Programming—get comfortable with functions, files, and plots first; then event-level LOB notebooks become far less scary.