Definition
Market Depth
Market depth shows the quantity of buy and sell orders waiting at each price level, indicating how much volume the market can absorb.
On Indian trading terminals, market depth typically displays the best 5 bid and 5 ask prices with their quantities. Deep markets (large quantities on both sides) absorb big orders with little price movement; shallow markets move sharply on small trades.
Traders read depth to judge liquidity and short-term pressure: a stack of large buy orders below the current price suggests support, while heavy sell orders above suggest resistance. Note that visible depth can be misleading, as large players may hide or rapidly cancel orders.
Related terms
- Order BookThe order book is the real-time list of all outstanding buy and sell orders for a stock, organised by price.
- Bid-Ask SpreadThe bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask), representing a core implicit cost of trading and a measure of liquidity.
- LiquidityLiquidity is how easily an asset can be bought or sold quickly without significantly moving its price.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.