What Is Depth of Market?
Depth of Market (DOM) shows the total volume of limit orders at each price level in the order book. It's typically visualized as a "depth chart" — a graph where the x-axis is price and the y-axis is cumulative order volume. The bid side slopes upward to the left; the ask side slopes upward to the right. The intersection is the current price.
How Depth of Market Works
DOM reveals liquidity concentration: a steep depth chart means thick liquidity close to the current price (hard to move); a shallow chart means thin liquidity (easily moved by moderate volume). "Walls" — large clusters of orders at specific levels — appear as sharp steps in the depth chart and often represent key support/resistance from institutional orders.
Why It Matters for Traders
Reading DOM in real-time provides an edge for short-term trading. Watching a bid wall get absorbed (eaten through by market sell orders) in real-time signals weakness. Watching ask walls get pulled (removed before being hit) signals that the resistance was an illusion. DOM analysis is the closest thing to watching the live battle between buyers and sellers unfold in real-time.