depthofbook

Depth of book, commonly called market depth, refers to the range of unexecuted buy and sell orders for a security at different price levels beyond the best bid and offer. It is derived from the order book, a live ledger that lists, for each price point, the quantity of shares or contracts traders are willing to buy or sell. Depth includes both sides of the market—bids and asks—and is typically analyzed from the top levels outward to gauge how much liquidity exists as prices move. Market depth metrics often include the best bid, best offer, and the cumulative depth at successive price levels, which aggregates the available quantity within a chosen price band from the midprice.

Depth data is most commonly provided as Level 2 or Level 3 data. Level 1 shows only the best bid and offer, while Level 2 reveals the visible depth at multiple price levels, and Level 3 exposes order-level detail that some venues restrict to participants. In practice, traders use depth to assess liquidity, estimate the price impact of a large trade, and judge market resilience—the ability of the price to recover after a large order consumes available depth.

Limitations include data latency, fragmentation across venues, and hidden or dark liquidity that is not visible in the public book. Spoofing and flash events can also distort apparent depth. Depth is a snapshot of current liquidity and can change rapidly; therefore it should be used alongside other indicators. Different venues may show different depth and time delays; aggregated depth across venues offers a broader view but may still not reflect fully tradable liquidity.