SLS (Structural Latent Signals)
Category: Structure
Formula
SLS is a composite primitive containing three distinct signals:
| Signal | Formula | Meaning |
|---|---|---|
| RAW | L(k, t) = log(Demand_k / Supply_k) at each time step | Structural imbalance evolution over time |
| GRAVITY | Directional pull derived from depth asymmetry dynamics | Where structure is pulling price toward |
| CURVATURE | Second derivative of the structural surface | Structural instability / regime change potential |
Intuition
A single depth snapshot tells you what the book looks like now. SLS tells you how the book has been changing. RAW is the movie of the depth ratio — a heatmap where each column is a new L(k) snapshot. Gravity extracts the directional pull: if demand has been systematically building on one side, gravity captures that drift. Curvature captures instability: when the structure is changing rapidly or non-linearly, curvature spikes — the book is in a transitional state where breakouts or breakdowns become more probable.
What It Answers
How is structure evolving?
- RAW: What has the structural imbalance looked like over time?
- GRAVITY: Which direction is structure pulling price?
- CURVATURE: How unstable is the current structure?
Visual Representation
- Panel: SLS heatmap (bottom-left panel)
- RAW display: 2D heatmap with time on X-axis, bucket level on Y-axis, color intensity = L(k) value. Teal/green = demand-dominant, orange/red = supply-dominant.
- GRAVITY display: 1D time series showing directional pull magnitude
- CURVATURE display: 1D time series showing instability magnitude
- Controls: Mode selectors (RAW, GRAV, CURV) in the SLS control panel. Auto-scale toggle. Shock detection overlay.
- Anomaly bar: Binary anomaly indicator row above the heatmap flagging shock events
Behavioral Interpretation
RAW
| Condition | Interpretation |
|---|---|
| IF RAW heatmap shows sustained teal near mid | THEN demand has been persistently dominant at execution levels |
| IF RAW shows color regime shift (red → teal or vice versa) | THEN structural flip — the book has changed sides |
| IF RAW shows alternating bands | THEN contested structure — neither side holds dominance |
GRAVITY
| Condition | Interpretation |
|---|---|
| IF gravity positive and rising | THEN structure is pulling toward demand — directional structural momentum |
| IF gravity negative and falling | THEN structure is pulling toward supply — selling structural momentum |
| IF gravity near zero | THEN structural equilibrium — no directional pull |
| IF gravity diverges from displacement | THEN structure and price disagree — potential mean reversion signal |
CURVATURE
| Condition | Interpretation |
|---|---|
| IF curvature high (positive or negative) | THEN structural instability — the book is in a transitional state |
| IF curvature spiking | THEN regime change imminent — structure is non-linear, breakout/breakdown likely |
| IF curvature low | THEN structural stability — current regime is self-sustaining |
Failure Modes
- RAW noise: In thin markets, individual bucket L(k) values fluctuate rapidly, creating a noisy heatmap. Use smoothing or increase the SLS window to filter.
- Gravity lag: Gravity is derived from structural dynamics, which inherently lag price. It confirms moves more than it predicts them. Do not use gravity as a leading indicator in isolation.
- Curvature false positives: High curvature can occur during normal structural replenishment (market makers restocking the book) without implying instability. Cross-reference with displacement and flow.
Interactions
With Depth: SLS is the time dimension of depth. Depth is the current snapshot; SLS RAW is the history. Rising gravity + thinning current depth = expansion signal.
With Displacement: Gravity aligned with displacement direction = structural confirmation of the price move. Gravity opposing displacement = structural friction, likely reversion.
With Trade Flow: SLS shows structural evolution; flow shows what is causing it. Rising gravity with matching flow = confirmed structural shift. Rising gravity without flow = passive structural drift (less reliable).
With Log(A/B) Depth: The current L(k) is one time-slice of the SLS RAW heatmap. SLS adds the temporal context that a single snapshot cannot provide.