Market depth of book
Family VII · Market & styles
Not to be confused with market depth.
Market depth of book is the quantity of resting orders visible at each price level in an order book. It shows how much size can be traded before the price moves to the next level. Depth is usually displayed as a ladder of bids and asks with cumulative sizes.
Reading the depth ladder
A depth-of-book display lists price levels with the total size available at each. The best bid and best ask sit at the top; deeper levels show progressively worse prices. Traders watch cumulative size to judge whether a large order can be filled without slippage.
Depth is not a promise of execution: orders can be cancelled or hidden, and displayed size may not reflect true liquidity.
Worked example
Consider a simplified order book for a stock:
The large buy order consumes three ask levels, moving the price up. Depth was thin relative to the order size.
Depth versus other liquidity measures
Depth of book is a snapshot of resting orders. It differs from market depth, which is the broader concept of how much liquidity exists in a market and how easily large orders can be absorbed without affecting price. Depth of book is the visible order-level detail; market depth is the overall capacity.
Often confused with
- market depth
- Market depth is the overall ability of a market to absorb large orders without significant price impact, while depth of book is the specific list of resting orders at each price level. The visible sign is that depth of book shows individual price levels with sizes, whereas market depth is a summary measure.