What is market depth?

Market depth, or depth of market (DOM), is closely related to liquidity and volume within a security, but does not imply that every stock showing a high trade volume has good market depth. Market depth can be evaluated by looking at the order book of a security, which consists of a list of pending orders to buy or sell at various price levels.

How do you know if a stock has a market depth?

Market depth can be evaluated by looking at the order book of a security, which consists of a list of pending orders to buy or sell at various price levels. On any given day, there may be an imbalance of orders large enough to create high volatility, even for stocks with the highest daily volumes.

How do market depth and breadth affect trading?

Market breadth and depth affect trading because they are derivatives of fundamental market aspects such as liquidity, volume, and volatility. Traders should take into consideration macro factors like them to make better trading strategies. Where Can I Find a Market Depth Indicator?

How do buy and sell orders affect market depth?

Typically, the more buy and sell orders that exist, the greater the depth of the market—provided that those orders are dispersed fairly evenly around the current market price of that security. Market depth refers to the market liquidity for a security based on the number of standing orders to buy (bids) and sell (offers) at various price levels.