In this article, we are going to discuss “the importance of order replacement ” and also its relationship with other liquidity metrics, commonly used in crypto markets.

## What is the Usage of Order replacement?

Range orders (AKA market order) can clear out a portion of the order book, thus, it reduces liquidity .

As we all know all liquidity KPIs (ex: volume existence , price gap,…)are based on availability of orders in the order book , so if orders are deleted, the liquidity reduces.

The order replacement KPI measures the time duration of order book replacement with regards to ** volume **and

**of the range order before and after it happens. This means this KPI is showing a time duration.**

*price*As shown above, market maker tries to fill the gap as fast as possible to increase liquidity.

### What if a Market Maker fills the gap within milliseconds?

The liquidity will be maximized , If order replacement is fast enough. (it means no individual can make gaps in the order book)

### How to calculate order replacement? what is its relationship with liquidity?

one can calculate this metric as ” The amount of time it takes to replace the price gap + the amount of time it takes to replace the volume gap“.

Liquidity has an inverse relationship with order replacement.

The faster orders are replaced (the lower the KPI), the higher the liquidity.

We have also published some other liquidity metrics in QuantVan’s blog which contains two other liquidity metrics such as bid/ask spread and price existence. You can also write your own algorithms here in QuantVan’s algorithmic trading platform. There are also tutorial videos here.