VPIN Metrics

VPIN, or Volume-Synchronized Probability of Informed Trading, is a quantitative metric used to detect the presence of informed trading and the potential for market instability. It calculates the probability that order flow is toxic by analyzing the volume of buys and sells in specific time buckets.

When VPIN values are high, it indicates that the market is dominated by informed traders, suggesting that liquidity providers are at a high risk of adverse selection. This metric is used by exchanges and institutional traders to monitor market health and to implement circuit breakers or other protective measures when the risk of a flash crash increases.

It is a powerful tool for bridging the gap between raw order flow data and actionable risk intelligence.