What Is Market Depth Chart and How to Read It?

Market depth charts show the supply and demand for a cryptocurrency at different prices. It displays the density of outstanding buy orders (demand) and sell orders (supply) for every different price level.

In many ways, a market depth chart is the visual representation of the order book. It displays a visual measure of the limit buy and limit sell orders in an order book.  

In the above chart, outstanding buy orders are lined up on the left (green) side and sell orders are lined up on the right (red) side. 

In that regard, the stack of buy orders is called a “buy wall” and the stack of sell orders is called a “sell wall”. The exact middle point in the chart corresponds to the current market price of the cryptocurrency. 

The horizontal axis represents a price range for the outstanding limit orders (price increases from left to right), while the vertical axis is the aggregate value of orders at every price level.

Monitoring Supply and Demand via the Depth Chart

As you can see in the above chart, the buy wall rises as price decreases. In other words, demand increases with decreasing prices. A higher buy wall indicates the belief of traders that there will be enough demand at those lower prices, so that the market price will not fall below those prices. 

On the contrary, a sell wall rises as the price increases, which means supply increases with rising prices. A high sell wall indicates the belief of traders that there will be adequate supply (a large amount of sell orders) at those higher prices so the market price will not be able to rise above those prices.

Where to Find Market Depth Chart at CEX.IO

In the Trade page of CEX.IO, the market depth chart can be found right below the order type selector (Limit, Market, Margin Trading) and right above the order books (Buy Orders and Sell Orders).

Note that each market/currency pair has a separate order book and a market depth chart. 

Closing Thoughts

With a market depth chart, you can see how many traders would like to buy a cryptocurrency at a lower price or sell at a higher price. 

In that light, a market depth chart shows any imbalances between the outstanding buy and sell orders. These imbalances act as potential support and resistance levels for the price.

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