what is market depth 
market depth refers to a market s ability to absorb relatively large market orders without significantly impacting the price of the security market depth considers the overall level and breadth of open orders bids and offers and usually refers to trading within an individual security 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 understanding market depthmarket 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 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 the decimalization of ticks on the major u s exchanges has been said to increase overall market depth as evidenced by the decreased importance of market makers a position needed in the past to prevent order imbalances market depth is a derivative of all the orders that populate a security s order book at any given point in time it is the amount that will be traded for a limit order with a given price if it is not limited by size or the least favorable price that will be obtained by a market order with a given size or a limit order that is limited by size and not price although a change in price may in turn attract subsequent orders this is not included in market depth since it is an unknown for example if the market for a stock is deep there will be a sufficient volume of pending orders on both the bid and ask side preventing a large order from significantly moving the price depth of market also refers to the number of shares of a particular stock which can be bought without causing price appreciation if the stock is extremely liquid and has a large number of buyers and sellers purchasing a bulk of shares typically will not result in noticeable stock price movements 