How to Use Market Depth Data for Trading Decisions
Armed with that knowledge, the trader can decide whether this is the right time to jump in and buy or sell the stock. The most popular stocks tend to have a greater depth of market than the stocks of lesser-known companies. This allows users to see a full list of buy and sell orders pending execution, along with the size of the trade, rather than just the best options available. If a stock is extremely liquid, it has a large number of both buyers and sellers. A buyer can purchase a large block of shares without causing a substantial stock price movement. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Anyone telling you that is oversimplifying the process of trading…