#5 Market Depth

What Is Market Depth?​

Market depth shows how much buying and selling interest exists at different price levels.

In simple words:

• It shows how deep the market is
• It tells you how hard or easy it is for price to move

Market depth comes directly from the Order Book (DOM).

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Thin vs Deep Market​

Thin Market

• Few orders at each price
• Small sizes
• Price moves easily and quickly

Deep Market

• Many orders at each price
• Large sizes
• Price moves slower and needs more volume

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How Market Depth Affects Price​

• If depth is thin, small market orders can move price many ticks
• If depth is thick, large market orders are needed to move price

Example:

• 50 contracts on each level → price moves easily
• 1,000 contracts on each level → price struggles to move

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Market Depth and Liquidity​

Market depth is a visual form of liquidity:

• More depth = more liquidity
• Less depth = less liquidity

High-liquidity markets usually have:

• Tight spread
• Stable movement

Low-liquidity markets usually have:

• Wide spread
• Fast, unstable movement

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Important Beginner Warning​

Market depth:

• Can change quickly
• Orders can be pulled or added
• Not all visible orders are real intention

So depth is context, not a signal by itself.

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Beginner Tip​

Do not focus on one price level only.
Always look at multiple levels above and below price.

 

#4 Order Book (DOM) – Introduction

#6 Volume (What It Really Shows)