Market depth
Family VII · Market & styles
Not to be confused with market depth of book.
Market depth is the measure of the volume of buy and sell orders available at each price level in an order book, indicating the market's ability to absorb large orders without significant price movement. It is a key indicator of liquidity and market resilience, showing how far the price might move in response to a given order size. Depth is typically displayed as a list of pending orders at various bid and ask prices.
How market depth is measured
Market depth is quantified by the number of shares or contracts available at each price level on both the bid and ask sides of the order book. A market with high depth has many orders at prices close to the current market price, while a shallow market has few orders, leading to larger price swings for the same order size. Depth is often visualised as a depth chart or a level 2 quote screen.
Worked example
Consider a stock with the following order book:
The total depth on the bid side is 800 shares, and on the ask side is 600 shares. A buy order for 1,000 shares would exhaust the ask depth up to $10.02 and likely push the price higher.
Factors affecting market depth
Market depth varies widely depending on the asset, time of day, and market conditions. Highly liquid markets such as major currency pairs or large-cap stocks typically have greater depth. Depth can change rapidly, especially during news events or periods of high volatility. Different exchanges and brokers may display depth differently, and the actual available liquidity can be fragmented across multiple venues.
Often confused with
- market depth of book
- Market depth of book refers specifically to the full list of pending orders at all price levels in the order book, whereas market depth is the aggregate volume at each level; the visible sign is that depth of book shows individual orders, while market depth shows cumulative quantities.