Market Depth

Market depth reflects the market's ability to handle large buy or sell orders without significantly impacting an asset’s price. It is represented by the total volume of orders in the order book at various price levels. High market depth suggests strong liquidity and indicates that large trades can be executed with minimal price fluctuation. Conversely, low market depth implies that large orders could cause substantial price changes. Understanding market depth is essential for traders and market makers, as it helps them gauge potential support and resistance levels, manage risk, and plan order execution.