Concept
Market Depth and the Order Book
The order book lists resting buy and sell orders at each price with the quantity available. Market depth is the view of that book, commonly shown as five levels on each side in Indian retail platforms.
How to read it
- The best bid and best ask are the highest resting buy and lowest resting sell. The gap between them is the spread.
- Quantity at each level indicates how much can trade there before price moves to the next level.
- A large order sweeps through multiple levels, which is why a big trade executes at an average price worse than the touch.
What it does not tell you
- Retail depth windows typically show only five levels. Substantial size can rest beyond them, so the visible book is a partial view.
- Resting orders can be cancelled at any moment. Displayed quantity is an intention, not a commitment, and it frequently disappears when price approaches.
- Reading intent from the book is unreliable. Large visible orders may be genuine, may be hedges, or may be withdrawn — the book does not distinguish.
Frequently asked questions
What is market depth?
The set of resting buy and sell orders at each price level with their quantities. It shows how much is available to trade at prices near the current one.
Why do I only see five levels?
Most Indian retail platforms display a five-level depth window. Orders beyond those levels exist but are not shown, so the visible book is partial.
Can I predict price from the order book?
Resting orders can be cancelled instantly and frequently are, so displayed size is a weak basis for inference. Reading intent from the book is unreliable for that reason.
How does depth relate to slippage?
Directly. Thin quantity at each level means an order consumes several levels to fill, producing an average price further from the touch — which is what slippage measures.
Related
- Liquidity and the Bid-Ask Spread — Concept
- Slippage — Concept
- Order Types: Market, Limit, SL and SL-M — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
Indicators describe the market. A journal describes you.
Knowing how RSI is calculated is the easy part. The harder question is whether you actually followed your own rules — CernoQuant reads your executed trades and measures the gap between what you intended and what you did.
See your own patterns →