Order book depth
The depth of an order book shows how many buy and sell orders are waiting around a cryptocurrency’s current price.
What is order book depth?
An order book is a list of orders waiting to be filled. Order book depth shows how many coins traders want to buy or sell at different prices.
These orders are usually limit orders. With a limit order, someone chooses a price and waits for the order to be filled at that price. Many orders close to the current price generally mean greater depth within that price range.
A depth chart shows the cumulative buy and sell orders at each price. The visible depth keeps changing because orders can be placed, modified, canceled, or filled.
An example of order book depth
Suppose two coins are for sale at €100 each, and three coins are for sale at €101 each. Someone places a market buy order for four coins, which buys immediately at the available prices.
They buy two coins for €100 each and two for €101 each. The average purchase price is €100.50, excluding fees. This shows that a larger order can fill across multiple price levels when there isn’t much available at the lowest price.
Why is order book depth important in crypto?
Order book depth helps explain why a large buy or sell order can affect the price more on one crypto exchange than on another. If an order has to fill across multiple price levels, its average execution price may differ from the first visible price. This is called slippage.
You may see this term in articles about liquidity, sharp price swings, and large transactions. Depth always applies to one trading pair on one trading venue. So the same cryptocurrency may have a very different order book elsewhere.
Visible orders don’t guarantee that your order will be filled. They can disappear before your order reaches the front of the queue. Large visible buy or sell orders also don’t reliably predict which way the price will move.
