Market Microstructure
Order Flow & Level 2 Microstructure: Limit vs. Market Orders
Cumulative Volume Delta (CVD), aggressive vs. passive order flow, and institutional iceberg absorption.
Author: CMD Wire Institutional Research
Updated: August 2026 • 6 min read
1. Limit Orders vs. Market Orders
Price movement in modern financial markets is driven by the interaction of two distinct order types:
- Passive Limit Orders: Provide liquidity and wait in the order book queue.
- Aggressive Market Orders: Consume resting liquidity by crossing the spread to execute immediately.
2. Order Flow Imbalance & Delta
Quantitative microstructure algorithms track Cumulative Volume Delta (CVD) — the net difference between market buy volume hitting the ask versus market sell volume hitting the bid. When aggressive market buying fails to push price higher, it indicates massive institutional passive absorption (iceberg limit orders) defending a resistance level.