Definition
Depth describes the quantity dimension of liquidity, beyond the best bid and ask. It may be shown as order-book levels or cumulative amounts within a chosen percentage of a reference price. Comparisons require the same price range, unit, and timestamp.
How It Works
For example, two markets may have the same narrow spread, while one offers 10 units near the best ask and the other only 1. A purchase of 5 units is more likely to move through higher prices in the second market. A depth chart adds quantities cumulatively as prices move away from the market.
Key Considerations
Depth is a snapshot of orders, not completed volume or guaranteed capacity. Orders can be withdrawn before execution, and displayed totals can include distant prices irrelevant to a small trade. Evaluate both sides separately and relate the chosen price band to the amount you intend to trade.