What is a Depth Chart?

A depth chart, in the context of cryptocurrency trading, is a visual tool that displays the supply and demand of a specific cryptocurrency at various price levels. Found on most centralized crypto exchanges (CEX), depth charts offer a snapshot of market activity and help traders quickly interpret the order book.

Understanding the Depth Chart

A depth chart is essentially a graphical representation of the order book for a given trading pair, such as BTC/USD. It plots buy and sell orders along different price levels to help traders see market depth.

Key Components:

• Bid Line (Green): Displays the cumulative value of buy orders at each price level.
• Ask Line (Red): Shows the cumulative value of sell orders at each price level.
• X-Axis (Horizontal): Represents the price levels.
• Y-Axis (Vertical): Represents the quantity of buy or sell orders at each price level.

The left side (green) reflects the buy orders (bids), while the right side (red) displays the sell orders (asks).

How a Depth Chart Works

A depth chart reflects market sentiment by showing supply and demand in real-time. The steeper the lines, the greater the number of orders at those price levels. This allows traders to gauge the market’s ability to handle large trades without significant price shifts—referred to as “market depth.”

• More depth = More liquidity = More stable prices
• Less depth = Less liquidity = Greater price volatility

Buy and Sell Walls

Buy and sell walls are visible spikes in the depth chart that indicate heavy buy or sell interest at a specific price.

What is a Buy Wall?

A buy wall appears when there are many buy orders at a specific price level. For example, if BTC/USD shows a large buy wall at $28,000, it indicates strong buying interest. This can suggest price support and may prevent the market from dropping below this level.

What is a Sell Wall?

A sell wall is the opposite. If many sell orders are placed at, say, $30,001, it forms a sell wall. This indicates potential resistance, as traders expect difficulty in pushing the price higher.

Both buy and sell walls can:

• Reflect genuine market sentiment
• Be created by large traders (“whales”)
• Be used for market manipulation (by placing and removing large orders quickly)

Why Depth Charts Matter

Depth charts help traders:

• Understand support and resistance levels
• Time market entries and exits
• Evaluate potential price movements

They provide a clear view of supply and demand at each price level, enabling better trading decisions.

In conclusion, depth charts are essential tools for anyone trading crypto on a centralized exchange. They turn raw order book data into a visual format that highlights market depth, potential price barriers, and real-time sentiment.

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