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Definition depthorder book depth2% depth

Market Depth

A measure of how much can be traded before the price moves by a set amount, usually read from resting orders near the quote.

Data providers commonly report depth as the total value of resting orders within a fixed distance of the mid price, such as within one or two percent on each side. Depth is a better description of tradable size than volume, because volume counts what already happened while depth describes what is currently available. It is measured separately on each side, since a market can be deep in one direction and shallow in the other. Depth also collapses fastest exactly when it matters, because quoting firms widen or withdraw during sharp moves.

In practice

Two venues can report similar daily volume while one shows several times more resting size within one percent of the mid price.

The common misunderstanding

Depth is a snapshot, not a promise; the orders counted in it can be canceled in the moment they would otherwise be needed.

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Related terms

Cascade Liquidation A chain reaction in which forced closings push the price further, which then triggers more forced…
Liquidity How easily an asset can be traded in size, quickly, without moving its price much.
Market Maker A firm or program that continuously offers to both purchase and sell an asset, earning the spread…
Order Book A live list of the prices and quantities people are willing to trade at, sorted from the best bid…
Price Impact How much a trade moves the market price by itself, simply because of its size relative to the…
Spread The gap between the highest price anyone is currently willing to pay and the lowest price anyone is…
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