What is a depth chart?
Part of our guide to Advanced Trading, tools and features to help you take greater control of your portfolio.
A depth chart is a visual representation of the information in the order book. Learning to read depth charts is a useful skill, because they’re an excellent tool for getting a quick sense of what’s happening in a market. When people talk about “depth,” they’re referring to the supply of an asset — the total amount available to buy and sell at each price point. In general, the more buy and sell limit orders there are for a given asset across prices, the “deeper” the market is considered to be.
You can think of the depth chart as the order book, but flipped on its side. On the x-axis, you’ll see price points, increasing from left to right. On the y-axis, you'll find the total amount of, say, bitcoin available to buy or sell, increasing from bottom to top.
Just like the order book, the depth chart has a buy side and sell side. The green bid line shows the total value of the bids, or buy orders. And the red ask line shows the total value of the asks, or sell orders. In the middle, you’ll see the current mid-market price, along with the spread — the gap between the highest bid and lowest ask.
Experienced traders look for familiar patterns in these charts, and use them to make educated guesses about where the market might move next. For example, steep cliff-like patterns are known as walls. On the buy side, they’re called buy walls, and on the sell side, they’re called sell walls.
Walls can indicate that a lot of people want to buy or sell at a specific price, and they can act like literal barriers to price movement. Buy walls can mean that an asset has support at a given price — a very large buy order, for example, or lots of people looking to buy can keep prices from going down. And sell walls can show resistance at that price — a large sell order or lots of people looking to sell could block prices from going up.
Like any chart or indicator, the depth chart provides one of many perspectives for analyzing crypto markets, forming an opinion on where prices are headed next, and deciding the price of your next trade.
Disclosure
Coinbase offers simple and advanced trading. Advanced trading is for experienced traders and is subject to the Trading Rules. Fees on the two platforms vary. Content is for informational purposes and is not investment advice. Investing in crypto comes with risk.
