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 thin market is characterized by low trading volume, high price volatility and wide bid–ask spreads.
A thin 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 thin market involves handling of large orders through order break-up, which makes a major difference between thin and competitive markets.
A thin market is also known as a narrow market.
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