Trading term
What is Level 2 (market depth)?
Level 2 shows the order book beyond the best bid and offer — the resting buy and sell orders stacked at each price, with their sizes. It shows intent that has not yet been executed.
A basic Level 1 quote gives you the best bid, the best offer and the last trade. Level 2 opens the book: several price levels either side, each with the total quantity resting there, often broken down by the market participant or venue posting it. The display is usually a ladder, bids descending on one side, offers ascending on the other.
What it adds is a view of unexecuted intent. A large block sitting on the bid a few cents below the market is liquidity someone has committed to providing, and traders watch whether it holds, gets filled, or disappears. Thin books move easily; deep ones absorb size without much movement.
The critical caveat is that resting orders are promises, not commitments. They can be cancelled in microseconds, and in modern markets frequently are — sometimes deliberately, to create an impression of demand that evaporates when approached. Level 2 shows what is displayed, which is not the same as what is real.
Offers of 140–260 shares above the market, against a 4,000-share bid sitting at $49.98. That wall is an intention — it can be cancelled in microseconds.
For example
The book shows 200 shares offered at $50.02 and 180 at $50.03, but 4,000 bid at $49.98 — a wall far larger than anything above. Price drifts down toward it. If those bids fill, that's genuine demand; if they vanish as price approaches, the wall was never real.
Go hands-on in Premium
That's Level 2 (market depth) in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Technical Analysis track.
Explore Premium →Why it matters to you
For anyone trading size, depth determines cost. A book with 200 shares at each level means a 5,000-share order moves the price against you materially, while a deep book absorbs it. Level 2 is how you see that before you send the order rather than discovering it in your fill price.
⚠ Displayed size is not committed size
Resting orders can be pulled instantly, and large 'walls' often disappear the moment price approaches — sometimes because the poster never intended to trade there. Much genuine size is also hidden in iceberg and dark orders that never show. Treat Level 2 as one noisy input, and trust the tape of executed trades over the book of intentions.