Market depth

Market depth refers in particular to the price continuity. The term is mainly used in stock market trading. With a high market depth there is no new information and only smaller market orders by the existence of limit orders and new limit orders only marginal, temporary price changes. In the form of a code, the market depth can be calculated, for example, as the slope of the order book ( between two adjacent bids); Bid and ask side are considered separately of course.

A high market depth stabilizes prices, as a purchase or sale then causes less price fluctuation. Less volatile prices give investors greater security when making their investment, and can thus lead to more transactions, in turn, increase the depth of the market. This positive feedback is a network effect.

Shown clearly means a high level of market depth that the order book within the tick size ( for example, 1 Euro Cent ) no holes exist.

Example of the letter page:

10,000 pcs 40,10 €       - ... ( "Hole" in the order book )   5,000 pcs 40,01 €   5,000 pcs 40,00 € Buy now ( ceteris paribus ) the money side unlimited up to 10,000 pieces, the price " quasi- continuous" ( discreetly with the tick size ) on 40,01 EUR for the last shares increases. From 10.001 pieces, the price of the last share but is now increasing by leaps and bounds to 40.10 euros. The market is here now to briefseitg a limited depth.

Closely related to the market depth is also the concept of market breadth. The German stock exchange used and published for liquidity assessment of Xetra tracks the Xetra Liquidity Measure ( XLM)