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Continuous markets are any markets that are generating a level of activity that is healthy enough to allow a typical trade to take place without creating a significant impact on the current market price for the security. While the trading may be brisk, it remains constant enough that the activity does not lead to any strong indicators that would entice investors to begin executing larger orders to buy or sell. Essentially, a continuous market is very stable, experiences a consistent level of trading, and tends to maintain an equitable market price.
In general, most financial analysts begin assessing the current status of a given market with the assumption that the current trading does indicate a continuous market. It is only when the analyst begins to notice some factors that are impacting the market price is an unusual manner that the market is deemed to be discontinuous in nature. For the most part, the marketplace is understood to be continuous in nature, but tempered with the understanding that this status could easily change on any given trading day, given the right set of circumstances.
For the conservative investor, a continuous market is often considered an advantage. This market condition makes it relatively easy to buy and sell various types of securities and make a little profit on the trades. Since the rate of volatility is relatively low with a continuous market, the trading options for the careful investor may appear to be more plentiful.
At the same time, more daring investors do not tend to ignore a continuous market. Since it is always possible for the relative equilibrium of this market to be impacted by any number of factors, the aggressive investor may monitor closely for signs that volatility is about to increase drastically. This allows the investor to execute orders that will generate a huge profit if the volatile conditions do come to pass. Depending on the circumstances and the size of the orders placed by aggressive investors, these actions can accelerate the occurrence of increased volatility and help move the continuous market into a discontinuous state.
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