How to Read a Depth Chart

Overview

A depth chart visualizes the live state of the order book by plotting the cumulative quantity of bids and asks at each price level. It provides a fast, intuitive way to see where liquidity sits and how far price might need to move to fill an order of a given size.

The green side represents cumulative bids (buy interest), and the red side represents cumulative asks (sell interest). The point where the two sides meet is near the current mid-price. The horizontal gap between the highest bid and lowest ask represents the spread.

Key Concepts

1. Cumulative bids and asks: Each point aggregates all orders at that price and better. A steeper slope indicates more liquidity concentrated in that zone.
2. Mid-price and spread: The mid sits between the top of book bid and ask. A tighter spread often signals healthier liquidity.
3. Buy and sell walls: Large clusters of resting orders can create visible "walls." Walls may slow price movement, but they can also disappear if orders are canceled or executed.

Why it matters

Depth charts help you estimate price impact. If you plan to buy a large amount into thin asks, price may move quickly against you. Conversely, deep liquidity can reduce slippage.

This is a concise first version. We’ll expand with interactive examples and scenarios in a later revision.