What market depth shows
Brokers usually show the best five bid and five ask levels, with the quantity and number of orders at each:
| Bid quantity | Bid price | Ask price | Ask quantity |
|---|---|---|---|
| 1,950 | 25,012.00 | 25,013.50 | 1,300 |
| 3,250 | 25,011.50 | 25,014.00 | 2,600 |
| 2,600 | 25,011.00 | 25,014.50 | 3,900 |
| 4,550 | 25,010.50 | 25,015.00 | 1,950 |
| 6,500 | 25,010.00 | 25,015.50 | 5,200 |
This illustrative depth is for Nifty futures, in units (one lot is 65). The best bid is 25,012.00 and the best ask is 25,013.50, a bid-ask spread of 1.50 points. Some brokers offer deeper views, up to 20 levels.
Reading the depth
- Liquidity: large quantities close to the best price mean you can trade size without moving the market much.
- Price impact: a market order larger than the quantity at the best ask fills at the next levels too.
- Imbalance: much larger bids than asks can suggest buying pressure, and the reverse for selling.
The limits of market depth
- Orders can disappear. Pending orders can be cancelled at any moment, so the depth you see can change before your order arrives.
- Hidden size. Iceberg orders show only part of their quantity. See iceberg orders.
- Algorithms dominate. Most orders on NSE come from algorithms that update quotes many times a second.
- Placing orders you do not intend to fill to mislead others is market manipulation and is prohibited.
Market depth for options
Near-the-money index options usually show deep books with tight spreads. Far out-of-the-money options and many stock options show thin depth, with only a few lots at each level. Check the depth before placing large or multi-leg orders.
Related terms
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Frequently asked questions
What is market depth in trading?
The pending buy and sell orders at prices below and above the current market, with their quantities.
What does total buy quantity mean?
The sum of all pending buy orders in the book. A larger total buy quantity than sell quantity is sometimes read as buying interest, but orders can be withdrawn.
What is 20-level market depth?
A view of the best 20 bid and ask prices instead of 5, offered by some brokers.
Can market depth predict price movement?
It shows current supply and demand, which can change in an instant. It helps with execution more than with forecasting.