A market, or a period of time within, that is participated by a low number of buyers and sellers, and as a result a low trading activity on both sides (buy and sell). This implies that a limited number of buying and selling orders exist at a given point in time or during an extended period. A narrow market is characterized by low trading volume, high price volatility and wide bid–ask spreads.
A narrow market may exist for a single security, a specific sector, or across securities and sectors. When the number of buying or selling offers is small, investors’ trading positions would be large relative to market size. Traders tend to extend price concessions, consequently impacting prices and executed transactions.
A narrow market involves handling of large orders through order break-up, which makes a major difference between narrow and competitive markets.
A narrow market is also known as a thin market.
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