What five levels of depth means
Each row is a price with a quantity waiting at it. Bids run from the highest buying price down; asks run from the lowest selling price up. Row one holds the two best prices, and each row after it is a little further from the last price.
| Qty | Bid | Ask | Qty |
|---|---|---|---|
| 15,000 | 10.18 | 10.22 | 8,500 |
| 22,400 | 10.17 | 10.23 | 12,000 |
| 9,000 | 10.16 | 10.24 | 18,300 |
| 31,500 | 10.15 | 10.25 | 7,700 |
| 6,200 | 10.14 | 10.27 | 25,000 |
| 84,100 | Total | Total | 71,500 |
A large order walks through levels
If you want more than the first ask holds, an immediate order takes the first level, then the next, until it is filled. Each level costs more than the one before, so your average price ends up above the first ask.
In a stock with thin depth, the same order could reach levels much further away. That is why depth shows how much size a stock can absorb before the price moves a lot.
What the totals tell you
In the example the visible bids total 84,100 shares and the asks 71,500. That describes only what is on screen now: more quantity waiting to buy than to sell, within those 5 levels.
Read the depth on a real stock
Open the order book for any stock and try working out the average price for a quantity larger than the first row.
Check yourself
1. First ask 5,000 at 20.00, second 5,000 at 20.10. You buy 10,000 now. What is your average?
2. Visible bids exceed visible asks. What does that mean?
Summary
- Market depth is the quantity waiting at several prices on each side.
- A large order walks through levels, so its average moves away from row one.
- Visible quantities change and do not guarantee the price direction.