Market depth (level 2).

In plain English

Market depth, often shown as a level 2 window, lists the orders waiting on both sides of the market at successive price levels rather than just the single best bid and ask. It tells you how many shares are available before the price would have to move for more to fill. Depth shows displayed orders only, so hidden and iceberg orders do not appear, and resting orders can be cancelled in an instant. Thin depth means a modest order can walk the book and move the price. Traders use it to size orders, not to predict direction.

01Why it matters

Depth tells you what an order will actually cost to fill, which matters far more than the quoted price when you are trading anything less liquid than a large-cap stock.

02The math, step by step

Say the ask side shows 300 shares at 12.00, 500 at 12.02, and 1,200 at 12.05. Buying 1,000 shares at market takes all 300, all 500, and 200 more at 12.05. Total cost is 12,020 dollars, an average of 12.02 a share rather than 12.00.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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