What Is Market Depth?
Market depth refers to the ability of the market to avoid large fluctuations in the price of securities when it undergoes large transactions. Together with price elasticity and spread, it is used as an indicator to reflect the liquidity of the securities market.
Market depth
- Chinese name
- Market depth
- Nature
- Judging the strength of stock liquidity
- Category
- the term
- Field
- financial
- Market depth refers to the ability of the market to avoid large fluctuations in the price of securities when it undergoes large transactions. Together with price elasticity and spread, it is used as an indicator to reflect the liquidity of the securities market.
- Practical use
- A "deep" market or specific securities facilitates the smooth execution of large transactions without causing large fluctuations in the price of the securities, because the amount of funds sold by the seller and the buyer matches, and when there is no longer a large sale, buy Insufficient volume causes the price to fall sharply; or in the case of large purchases, no corresponding sale causes the price to rise. Generally, those liquid large-cap stocks have the best market depth, and large funds can come in and out freely. However, the depth of the market is not entirely measured by liquidity, trading volume, or the size of outstanding shares. As long as some small and medium-cap stocks are active in trading and the buyers and sellers are close to each other, they also have a good market mix.
- Market depth is one of the indicators to judge the strength of stock liquidity. Measured by the number of orders submitted at each price level. If more orders are submitted at each price level, the easier the transaction is, the higher the stock's liquidity. From "Basic Knowledge of the Securities Market".