Market Depth FAQ — Reading Order Books and Depth Charts

What is market depth?

The total quantity of orders resting near the current price, on both sides of the book. It determines how large an order can execute before moving the price.

Depth is normally measured as cumulative quantity within a band of the midpoint — for example all bids within 2% below and all asks within 2% above.

How do I measure depth?

Find the midpoint: (best ask + best bid) / 2.
Choose a band — ±2% is a reasonable default.
Sum the quantity resting within that band, on each side separately.
Multiply by the midpoint to express it in quote-asset value.

Step 4 matters for comparison: 12,700 tokens means nothing on its own, while "12,700 USDT of bid depth within 2%" is a figure you can compare against any other market. See how to read market depth.

How do I read a depth chart?

It plots cumulative depth: price horizontally, cumulative quantity vertically, bids extending left of the midpoint and asks right.

Steep walls close to the midpoint — substantial nearby depth.
A flat stretch near the midpoint — little resting size close to the price; orders will move it immediately.
A sudden vertical step — one very large order at a single price. Treat with suspicion.
Asymmetric sides — more depth on one side than the other.

The chart visualises exactly the numbers described above. It is quick to read once you know what they mean, and misleading if you read it without.

What is a buy wall or sell wall?

A large concentration of orders at one price level, appearing as a vertical step on a depth chart.

Walls are often interpreted as support or resistance. Be cautious: resting orders can be cancelled instantly, and a wall placed to create an impression is typically removed exactly when it would matter.

A useful adjustment is to recompute depth excluding the largest single order. If the number collapses, the market's depth was that one order.

What is spoofing?

Placing large orders with no intention of filling them, to create an impression of support or resistance, then cancelling as the price approaches. It is market manipulation, illegal in regulated markets, and enforcement in crypto is uneven.

Signals: an order far larger than anything else on the book, sitting at a round number, retreating as price approaches, or appearing and disappearing on a regular cadence.

The defence is not to detect every instance but to stop treating any single large order as information.

Does depth imbalance predict price direction?

Weakly at best, and it is easy to over-read.

Heavier bids than asks means more resting buying interest at nearby prices, often read as supportive. But it describes only resting limit orders — it says nothing about participants waiting to trade at market, who are invisible. And resting orders can be withdrawn instantly.

Treat imbalance as weak evidence about current positioning, not as a prediction.

Why does depth change so much?

Because it is made of orders that participants can cancel at any moment, and they do — particularly when conditions change.

Depth is thinnest during volatility, around news, in thin hours, and on newly listed pairs. A depth measurement is a snapshot of one moment. Measuring in calm conditions and then trading during a sharp move means trading against a book you have not looked at.

How much depth do I need for my order?

Turn the question around: your maximum sensible market order is the depth within the band you are willing to move the price.

Want to keep impact under 0.5%? Measure depth within 0.5% of the midpoint and do not exceed it. For anything larger, use limit orders or split across time.

Should I check depth on both sides?

Always. You need the side you will exit through as much as the side you enter through.

A book with 50,000 of bids and 4,000 of asks is not liquid — it is a market where buying is expensive and where, if sentiment turns, the bids may not be there either. Checking only your entry side is how holders end up in positions they cannot exit.

Can I add the depth across several exchanges?

No. You execute against one book, not against a sum.

Aggregate depth figures published by data sites add books you cannot combine in a single order. Measure depth on the specific venue you will trade on.

Market Depth — Frequently Asked Questions