Depth (Orderbook)
Category: Structure
Formula
D_k = demand liquidity at bucket k (USD)
S_k = supply liquidity at bucket k (USD)
Each bucket spans a price range defined by the bucket scheme (e.g., 0.02% per level with 25 buckets per side = 0.50% total depth).
Demand at bucket k = bids(A)[k] + asks(B)[k] — liquidity that would push the ratio up.
Supply at bucket k = asks(A)[k] + bids(B)[k] — liquidity that would push the ratio down.
Intuition
Depth is the raw material of the orderbook. It tells you what exists at each price level — how much liquidity is resting, waiting to be consumed. Thick depth means friction: price has to work harder to move through it. Thin depth means ease: price can slip through with minimal effort. Depth is not directional on its own — it defines the terrain that flow must navigate.
What It Answers
What exists?
The distribution of resting liquidity across price levels, showing where resistance and support live.
Visual Representation
- Panel: Depth chart (top-right, "DEPTH" section)
- Display: Mirrored horizontal bar chart — demand bars extend left from center, supply bars extend right
- Color: Demand bars use the positive color (teal/green), supply bars use the negative color (orange/red)
- Axis: USD value per bucket on the Y-axis; percentage distance from mid on the X-axis
Behavioral Interpretation
| Condition | Interpretation |
|---|---|
| IF thick depth at a level | THEN high friction — price movement through this level requires significant volume |
| IF thin depth at a level | THEN low friction — price can move easily, potential for rapid displacement |
| IF depth asymmetric (thick demand, thin supply) | THEN structural support for upward movement — supply is the path of least resistance |
| IF depth asymmetric (thin demand, thick supply) | THEN structural resistance against upward movement — demand side is vulnerable |
| IF depth thinning over time at current levels | THEN liquidity withdrawing — participants are stepping away, volatility expansion likely |
Failure Modes
- Spoofing: Large resting orders that are withdrawn before execution. Depth appears thick but evaporates on approach. Watch for depth that repeatedly appears and disappears at the same level.
- Iceberg orders: Hidden liquidity not visible in the book. Depth appears thin but actual resistance is much higher. Trade flow reveals this — absorption without book depletion indicates hidden orders.
- Stale snapshots: If the depth snapshot is delayed (high
lag_ms), the displayed depth may not reflect the current state. The system tracks staleness and flags it.
Interactions
With Displacement: The highest-value structural combination. Displacement tells you how far price is stretched; depth tells you what stands in its way. Stretched + thin ahead = continuation. Stretched + thick opposing = rejection.
With Trade Flow / Trade Profile: Flow hitting thick depth = absorption (orders being consumed). Flow hitting thin depth = expansion (price slicing through). This distinction is the foundation of the Absorption vs Expansion tutorial.
With Log(A/B) Depth: Raw depth shows absolute USD values. Log(A/B) transforms depth into a relative imbalance ratio, making structural bias visible at a glance.
With SLS: SLS tracks how depth structure evolves over time. Rising SLS gravity + thinning depth = structural expansion signal.