What is Market Depth
What is market depth?
Market depth describes a real-time electronic list of all the buying and selling orders queuing up to be transacted on a stock market or other trading platform. It is useful for traders to see where the weight of bids and offers lies for any security.
Key takeaways
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Market depth is a real-time electronic list of all buying and selling orders waiting to be executed on a trading platform.
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It displays all bids and offers for a security, not just the best prices, showing the complete order book state.
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Market depth helps traders identify where the weight of orders lies and predict potential short-term price movements for securities.
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The system includes limit orders placed with brokers to buy or sell fixed amounts at specified prices or better.
Where have you heard about market depth?
As an investor, you may find your financial adviser discussing market depth in relation to a security in which you are interested. Market depth may be explained in how-to investment guides.
What you need to know about market depth
It describes a real-time list showing the state of play with regard to buying and selling in a particular security. Limit orders, orders placed with a broker with instructions to buy or sell a fixed amount of the security at a set price, or better, are shown reflecting the current state of the order book for that security. Because market depth shows all bids and offers, not just the best prices, it is seen as a good guide to where the price may go in the immediate term.