Level 2 Quotes How to Read Market Depth Chart Videos

These two columns help traders identify where there is market buying and market selling and to what extent. The bid and ask columns how to read market depth chart to hold some importance, however to a lesser degree. They are intent on market participation rather than actually traded contracts.

Sell walls are a large number of sell orders, typically placed on the order book all at once, above the current price. The overlap between $5,996 and $5,983 is possible because of sFOX’s aggregated orderbook from https://www.tokenexus.com/ many global exchanges and liquidity providers and is an arbitrage opportunity to sFOX traders. Nike’s price briefly touched the $130 resistance level, but then retreated from it and failed to break it again.

Understanding Market Depth

As an example, let’s look at Apple (AAPL), currently the largest stock by weight in the S&P 500. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. For example, if I am looking to buy 10 apples at $1 each my buy order would be plotted on the graph at the $10 mark along the x-axis with an order for 10 apples reflected on the y-axis. As a supplier an individual may put a sell order for 10 apples at $1.10 each which would be plotted as a dot on the right side.

If you are in a position on this symbol (you either bought or sold some), your position size [13] will be shown as a number at the top of the DOM. If you bought (in a long position) the box will be blue, and if you sold (in a short position) it will be red. Seeing this trend, the trader might determine that Stock A is going higher. Armed with that knowledge, the trader can decide whether this is the right time to jump in and buy or sell the stock. The most popular stocks tend to have a greater depth of market than the stocks of lesser-known companies. This allows users to see a full list of buy and sell orders pending execution, along with the size of the trade, rather than just the best options available.

The bottom line on how to read stock charts

Consider the order book information in the image below, which displays the current bid-ask spread on the left, along with the market depth on the right. As you likely noticed from the previous example the Depth Chart may look lopsided to either the buy or sell side. This can be an indication of more bullish market sentiment if the buy-side is larger, or more bearish sentiment if the sell-side is higher. For example, the price chart might look bullish, but there is a large accumulation of book data on the sell side of the Depth Chart. Conversely, sell walls represent a large number of sell orders set above the current price.

Stocks with a strong depth of market tend to be popular large-cap companies like Apple (AAPL). They usually have strong volumes and are quite liquid, allowing traders to place large orders without significantly affecting their market prices. The Depth of Market, commonly referred to as the DOM is one of the most integral parts, if not the most integral part to trading futures. This is what differentiates the amateurs from the pros in the market. There are two main tool to successful futures trading and one of them is the DOM, the other the volume profile.

Factors That Influence Market Depth