A thin market refers to a market characterized by a minimal number of buyers and sellers plus high price volatility. Also referred to as a narrow market, it is also characterized by high bid-ask spreads and low trading volume.
This type of market does experience lots of drastic swings thus making it difficult for traders and investors to trade systematically. As a result, it is quite common in a thin market for price fluctuations to be larger between transactions and slippage can be a common occurrence.
As said earlier, a thin market is characterized by a small number of traders – buyers and sellers- which results in a low volume of transactions and illiquidity. Due to this, price movement becomes more volatile.