Depth of Market

The quantity available at each price level beyond the top of book. Depth tells you how much you can trade before your order starts consuming worse prices.

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Why it matters

Depth determines how quickly slippage grows with size. Low depth means small orders behave, but bigger orders get punished nonlinearly.

Trading use: the point is not vocabulary. The point is prediction: what changes when this shows up?

Common trap

Assuming you can scale position size without changing execution quality. Depth is the ceiling that size crashes into.

Example

In a thin session, you try to exit quickly and your order eats three levels of liquidity. The chart barely moved, but your average exit is much worse.

Operational cue: if you can’t point to it on the chart, in the DOM, or in your broker logs, treat it as a story and trade smaller.

Notes

Quick rule

If you see this repeatedly, you are in a different regime than your model assumes.
Regime change usually means position size change.
When in doubt: trade smaller, or don’t trade.