Depth Chart Visualization
A depth chart is a graphical representation of the order book for a specific asset on an exchange. It displays the cumulative volume of buy and sell orders at various price levels.
The vertical axis represents the total volume of orders, while the horizontal axis represents price levels. Buy orders, known as bids, are typically shown on the left in green, while sell orders, known as asks, are shown on the right in red.
The point where the two sides meet represents the current market price or the mid-price. This visualization allows traders to assess market depth, liquidity, and potential support or resistance levels.
A steep slope on either side indicates high liquidity at that price point, while a flat area suggests a gap in orders, which could lead to significant price slippage. Traders use this tool to gauge market sentiment and the strength of buying or selling pressure.
It is a fundamental component of market microstructure analysis in both traditional and digital asset exchanges.