What is Depth of Market or DOM?

What is Depth of Market or DOM?

By Sir Loin | The Crypto Shenanigans | 10 Apr 2021

Crypto and stock quotes never stand still, they are constantly moving. Prices change under the influence of many factors, and the most important of which is the balance between supply and demand.


Depth of Market is one of the most useful trading tools that allow you to see and feel the depth of demand and offers for a specific instrument.

This tool has many names:

  • Order Book;
  • Depth of Market;
  • Book of applications;
  • Second-level (Level 2);
  • Open Book.

If you want to buy or sell a specific security, then with the help of the order book you can see at what prices at a particular moment your shares are being sold and bought. It makes it easier for you to determine the very right moment to conduct your deal.

The Depth of Market is an indispensable tool for active traders. Technical analysis experts use it to identify the line of least resistance. With the help of the order book, short-term forecasts are made, which are effectively used in scalping.

It is also useful for portfolio investors. For example, if you plan to form a specific position, you, first of all, refer to the DOM in order to understand the situation for this instrument at the moment.

The main difference between the order book and price charts is the lack of visual display of market data. It only displays the orders received, which are close to the market and the execution of which can affect the pricing.

If you figure out how to read the order book, you will begin to understand the market from the inside, and you will understand where volume orders are placed. You will get a feel for price action in real time, you will feel supply and demand at your fingertips, and you will begin to identify the most liquid price levels.

What is an exchange order book?

The order book is a table that contains information about orders to buy and sell crypto or stock.

How effective is this tool?

It all depends on your knowledge and experience, as well as on the ability to apply in practice the various tools offered by the exchange.

By itself, the Depth of Market does not provide absolutely accurate data on the course of trading, only data on limited orders, which contain the price and quantity of "goods".

What is missing in the order book?

Conditional, iceberg orders and market orders are not "typed" into the book.

Conditional orders will be executed only when a certain condition is reached;
Iceberg order is a limit order, in which the volume is specified, but this volume is divided into visible in the order book and invisible;
Market orders are orders to buy or sell at the best available price.

And maybe that is why many investors are skeptical about the order book. With its help, it is not always possible to reliably understand how much volume investors are really willing to buy or sell. However, Depth of Market is still one of the most useful tools created for trading. 

Sir Loin
Sir Loin

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