A depth chart is a powerful tool used by cryptocurrency traders to visualize market supply and demand in real time. While it might sound like something a scuba diver uses, it’s actually a critical component of trading platforms—especially on centralized exchanges (CEX). Alongside price charts, depth charts provide traders with insights into the order book, helping them anticipate potential price movements and make informed decisions.
In this guide, we’ll break down what a depth chart is, how to read it, and why it matters for your trading strategy.
Understanding the Basics of a Depth Chart
At its core, a depth chart is a visual representation of an exchange’s order book—a live list of pending buy and sell orders for a specific cryptocurrency at various price levels. It shows the supply and demand dynamics at any given moment, allowing traders to gauge market sentiment.
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The chart plots two main elements:
- Buy orders (bids) — shown in green
- Sell orders (asks) — shown in red
These are displayed across two axes:
- The horizontal X-axis represents price levels
- The vertical Y-axis reflects the volume (quantity) of orders at each price
This visualization helps traders quickly assess where large clusters of orders exist—often referred to as “walls”—and understand potential support and resistance zones.
How to Read a Depth Chart
Let’s dive deeper into the components that make up a typical depth chart.
The Bid Line (Green)
The green line on the left side of the chart represents the cumulative total of all buy orders (bids). Each point along the line shows how much volume traders are willing to buy at or below a certain price. A steeper or thicker green line suggests strong buying interest.
The Ask Line (Red)
The red line on the right displays the total sell orders (asks). It shows how much volume is available for sale at or above specific prices. A prominent red wall may indicate resistance, where sellers are ready to offload large quantities.
The X-Axis: Price Levels
This horizontal axis runs from lower prices on the left to higher prices on the right. Buy orders are plotted to the left of the current market price, while sell orders appear to the right.
Quick memory tip:
- Left = Green = Buy (Bids)
- Right = Red = Sell (Asks)
The Y-Axis: Order Volume
The vertical axis measures the quantity of cryptocurrency involved in pending orders. The higher the line reaches at a given price, the greater the volume stacked at that level.
Most trading platforms allow you to hover over the chart to see exact figures—how many BTC, ETH, or other assets are being bought or sold at each price point.
How Does a Depth Chart Work?
A depth chart reveals market depth—the ability of a market to absorb large buy or sell orders without causing drastic price swings. High depth means there are many orders on both sides, leading to more stable pricing. Low depth can result in high volatility when large trades execute.
When the green (bid) side towers over the red (ask), it signals strong buying pressure—traders expect prices to rise or are defending a support level. Conversely, a dominant red side suggests selling pressure, possibly indicating resistance or bearish sentiment.
Market depth also helps identify liquidity. A well-balanced, deep order book usually belongs to major trading pairs like BTC/USDT or ETH/USD, whereas shallow charts may belong to lesser-known altcoins with lower trading volumes.
Buy and Sell Walls: What They Mean
One of the most telling features of a depth chart is the presence of buy walls and sell walls—large clusters of orders that can influence price action.
What Is a Buy Wall?
A buy wall occurs when there's a significant volume of buy orders at a specific price level. For example, if thousands of BTC are being bid at $28,000, that creates a visible green wall.
Such walls often act as support zones. Traders may interpret them as signs that the market believes the price won’t drop below that level. The sheer volume can absorb selling pressure and even push prices upward.
However, not all buy walls are genuine. Some are part of spoofing strategies, where large traders place massive orders to create false demand—and cancel them before execution. This manipulates perception and can trap inexperienced traders.
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What Is a Sell Wall?
A sell wall is the opposite—a large stack of sell orders at a particular price, say $30,001 for BTC/USD. These act as resistance levels, potentially halting upward momentum.
When prices approach a sell wall, traders may fear an influx of supply and choose to sell early, accelerating downward movement. Like buy walls, sell walls can be real indicators of market sentiment—or artificial constructs used to manipulate price.
Both types of walls are dynamic. They can form, grow, shrink, or vanish within seconds as traders adjust their positions.
Frequently Asked Questions (FAQ)
What does a balanced depth chart look like?
A balanced depth chart has relatively equal volume on both the bid and ask sides. This suggests a stable market with healthy liquidity and no immediate pressure to move sharply up or down.
Can I trade directly from a depth chart?
While you can't execute trades from the depth chart itself, it informs your trading decisions. You can use it to set limit orders near walls or anticipate breakouts when walls are breached.
How often does a depth chart update?
Depth charts update in real time—sometimes multiple times per second—reflecting live changes in the order book as new orders are placed, modified, or canceled.
Do all exchanges show the same depth chart?
No. Depth varies by exchange due to differences in user base, trading volume, and order flow. A coin may have deep liquidity on one platform but appear thin on another.
Should I trust large buy or sell walls?
Use caution. While walls can indicate strong support or resistance, they can also be manipulated. Always combine depth analysis with other tools like volume indicators and candlestick patterns.
How can I use a depth chart for day trading?
Day traders use depth charts to spot imbalances, anticipate short-term reversals, and identify optimal entry and exit points. For example, a shrinking sell wall might signal an upcoming breakout.
Final Thoughts
Understanding a depth chart empowers you to see beyond simple price movements and into the underlying mechanics of supply and demand. Whether you're scalping, day trading, or holding long-term, this tool offers valuable insights into market psychology and liquidity conditions.
By recognizing buy and sell walls, interpreting order imbalances, and monitoring real-time shifts in market depth, you position yourself ahead of sudden price swings.
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With practice and the right tools, reading depth charts becomes second nature—transforming raw data into strategic advantage.
Core Keywords: depth chart, order book, buy wall, sell wall, supply and demand, market depth, cryptocurrency trading, trading volume