What is depth of market?

Ever hit “buy” and watched your fill price come back worse than expected? That gap between what you thought you’d pay and what you actually paid often comes down to depth of market. Depth of market (also called DOM, market depth, or the order book) shows how much buying and selling interest is waiting at different prices. It’s one of the clearest ways to see liquidity in real time, and it helps explain spread, slippage, and why some price levels feel “sticky.” This article is educational only, not financial advice. What is depth of market, in plain English? Depth of market is a live list of pending orders, stacked by price. Think of it like a checkout line at a busy store. If there are lots of people (orders) in line at many “checkout counters” (price levels), the store can handle big purchases without chaos. If the line is thin, one big buyer can push through fast and move prices.  At a glance, DOM answers: How much is available to buy or sell near the current price? How wide is the spread (the gap between best bid and best ask)? If I place a market order, how likely am I to get slippage? If you want another plain-language overview, this breakdown of market depth and why it matters is a solid primer. The DOM ladder: what you’re really looking at An AI-created infographic showing a DOM ladder with bid size, price, ask size, and key labels like liquidity and spread. Most trading platforms show depth of market as a “ladder”: Bid side (buyers): Limit buy orders waiting below the current price.Ask side (sellers): Limit sell orders waiting above the current price. The closest prices are the ones that matter most for quick execution: Best bid: highest price someone is willing to pay right now. Best ask: lowest price someone is willing to sell at right now. Spread: best ask minus best bid. Tight spreads usually mean better liquidity. DOM also hints at where price might “pause.” Large resting orders can act like speed bumps. A thick bid stack can feel like support, and a thick ask stack can feel like resistance, at least for a moment. Just remember that orders can be added, pulled, or replaced quickly. For a definition-focused reference, this Depth of Market (DOM) entry explains the concept in a straightforward way. A numeric DOM example (and how slippage happens) An AI-created visual showing how a market order can “walk the book” and change the average fill price. DOM becomes useful when you translate it into a “what will my order do?” estimate. Imagine the current best ask is $100.00, and the ask side looks like this: Ask Price Size Available (units) 100.00 400 100.01 600 100.02 800 Now you send a market buy for 1,500 units. What happens? You buy 400 at 100.00 (that level is now gone). You still need 1,100, so you buy 600 at 100.01 (that level is now gone). You still need 500, so you buy 500 at 100.02 (partial fill at that level). Your average fill price is: Cost = (400 × 100.00) + (600 × 100.01) + (500 × 100.02) Cost = 40,000 + 60,006 + 50,010 = 150,016 Average fill = 150,016 / 1,500 = 100.0107 Even though the best ask was 100.00, you paid about 0.0107 higher per unit on average. That’s slippage, caused by limited size at the top levels. This is why traders watch depth across multiple levels, not just the best bid and ask. A tight spread can still hide a thin book. Depth of market across stocks, futures, and crypto (it’s not the same) DOM isn’t “one universal truth.” It depends on the product and where it trades, and the quality can change based on the venue and your data feed. Stocks In stocks, “Level 2” often shows quotes from multiple market makers and venues. You may see fragmented liquidity, and not every share of interest is displayed the same way. Some orders are hidden or routed. Futures Futures often trade on centralized exchanges, which can make the order book feel more unified. Many futures traders lean heavily on DOM because the ladder can be very readable during active hours. CME has educational material on why depth and volume matter for these markets, including CME’s overview of depth (volume). Crypto Crypto order books are usually per exchange, so “the DOM” on one venue is not the full market. Liquidity can also vary a lot by pair and time of day. On a venue like xxkk crypto exchange, the order book you see reflects orders resting on that platform for that trading pair. If you compare books across exchanges, you’ll often notice different spreads, different depth, and different reactions to large market orders. Key takeaway: DOM availability and accuracy depend on the exchange and the market data feed. Some feeds show deeper levels, faster updates, or fewer gaps. Advanced notes (optional, for when you want more detail) Advanced note: displayed liquidity vs real liquidityDOM shows resting limit orders that are visible. It doesn’t show everything. Some venues support hidden orders, and large traders may slice orders to avoid showing size. Advanced note: don’t treat big walls as permanentLarge orders can be pulled in milliseconds. A “wall” can be real supply or demand, or it can be a short-lived signal that disappears when price gets close. For a deeper reference-style explanation, this market depth guide covers common terms and how depth is displayed. FAQ: common DOM questions Is DOM the same as Level 2? They’re closely related. Level 2 is a broad term for quote and order book depth beyond the best bid and ask. DOM is usually the ladder-style display that shows those levels stacked by price, often designed for fast order entry. DOM vs time and sales, what’s the difference? DOM shows what’s waiting (resting limit orders). Time and sales shows what actually traded (prints as orders execute). Many traders watch both: DOM for potential liquidity, time and sales for confirmation that trades are hitting the bid or lifting the ask. Can depth of market predict price? Not reliably. DOM can hint at where price might slow down, and it can explain why a move happened (thin book, big order, spread widening). But it can’t promise direction, because orders can appear, vanish, or get filled faster than you can react. Conclusion Depth of market is a practical way to see liquidity, spread, and likely slippage before you place an order. Read it like a map of nearby supply and demand, not a crystal ball. Start simple by checking the top few levels, then connect what you see to your order size and risk. If you keep one idea, make it this: depth of market helps you understand execution, not predict the future.