Order book depth

The quantity of resting buy and sell orders available at and around the current price. Depth shows how much size the market can absorb without moving much.

1 min

Why it matters

Depth is the difference between ‘a price’ and ‘a price with size’. Low depth means your order moves the market and your exit may be expensive.

Operational use: this is how the market taxes urgency. When it appears, slow down or size down.

Common trap

Looking only at the chart and ignoring the book. Charts can look stable while depth is evaporating.

Example

You can buy 10k units with no impact, but a 500k order sweeps multiple levels. The chart prints a spike and your average fill is far from what you expected.

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.