Depth

Definition

Depth in plain English

Depth answers the question: if I want to trade a LOT, how much can I move before the price shifts against me? A market is "deep" when big orders fill at nearly the same price, and "thin" when even a modest order swings the price a lot. Picture a fruit stand with 500 apples at $1 each — you can grab 200 and still pay a buck apiece; a stand with only 5 apples runs dry instantly and you'd have to overpay for more. It's one of the three ingredients of liquidity, alongside how tight the prices are and how fast you can trade.

Learn these first

• Spoofing
• Tick Size

Related Market Microstructure terms

• Amihud Illiquidity Measure
• Ask (Offer)
• Bid
• Bid–Ask Bounce
• Bid–Ask Spread
• Dealer
• Effective Spread
• Inventory Risk
• Lee–Ready Algorithm
• Liquidity