Market Depth

Market Depth refers to the measure of the quantity of buy and sell orders at different price levels in a financial market, particularly in cryptocurrency trading. It provides insight into the liquidity and potential price movements of an asset by showing how much volume is available to be traded at various price points.

For example, consider a cryptocurrency exchange where Bitcoin is being traded. The market depth chart displays the cumulative volume of buy and sell orders at different price levels. If there is a high market depth at a certain price level, it indicates strong support or resistance, depending on whether it's buy or sell orders respectively.

Case:

Let's say Bitcoin (BTC) is currently trading at $50,000. The market depth chart shows that there are a significant number of buy orders at $49,800, $49,700, and $49,600 levels, indicating strong support. Conversely, there are a large number of sell orders at $50,200, $50,300, and $50,400 levels, suggesting strong resistance. This information helps traders make decisions about entering or exiting positions based on the prevailing market sentiment and potential price movements.