In plain English
What Market depth means
Top-of-book data shows the best bid and best ask, usually with their available sizes. Market-depth data extends beyond those best prices to additional bid and offer levels. In an exchange order book, it commonly aggregates resting limit orders at each level. In over-the-counter forex or CFD platforms, depth displays may be provider-specific and need not represent the entire market.
Why it matters
Depth helps explain why an order may execute at several prices. If little size is displayed at the best price, a larger market order may consume that level and reach worse prices. However, depth can change or disappear before execution, and hidden, undisplayed, or rapidly refreshed liquidity may not appear in the display.
Example
A simplified order book shows offers of 20,000 units at 1.08500, 30,000 at 1.08502, and 50,000 at 1.08505. A 70,000-unit market buy could fill 20,000 at 1.08500, 30,000 at 1.08502, and 20,000 at 1.08505. Its average price would be about 1.08502, before fees.
Quick answers
Common questions
What is the difference between market depth and an order book?+
An order book is the record or display of unmatched orders. Market depth is the amount of buying and selling interest shown across price levels within that book or depth-data feed.
Does more displayed depth always mean better execution?+
Not always. It can be helpful, especially for larger orders, but execution also depends on how quickly orders are canceled, refreshed, or matched, as well as on trading activity and price volatility.
Sources