Depth of Market

Posted in Finance, Accounting and Economics Terms, Total Reads: 1539

Definition: Depth of Market

Depth of Market is the extent of all buy and sell orders of a particular security. More the orders, more is the depth but without price change.

Normally if there are lot of buyers and sellers, the prices can fluctuate. Here is where we can better understand depth of market. The market is deep if lot of shares or securities can move hands but the price does not change a lot. 

All of this information can be useful to traders because it shows not only where price is now, but where it is likely to be in the near future

A price ladder display (Climbing the Market) which is a kind of Depth of Market shows

Middle Column-Price Level,

Left Column- number of buyers at each price level

Right Column- number of sellers at each price level

Another way to view market depth is by overlaying it on a price chart where the levels of market depth are displayed over the right-hand side of a price chart, next to the various prices.

Hence, this concludes the definition of Depth of Market along with its overview.

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