What is a depth chart

On the trading page, you will find different charts and tools to help you to analyze the market situation, one of them is the Depth chart.

Depth charts are one of those which can let you know about Demand and Supply. It gives a visualization of demand or supply of a particular stock or commodity or a cryptocurrency. You probably already know the relationship between supply and demand. Depth charts are something to essentially show the supply and demand at different prices.

A depth chart for a bid/ask market has two lines, one for BIDs (BUY orders) and one for ASKs (SELL orders). GDAX live chart has a Greenline for BIDs (BUY orders), a Redline for ASKs (SELL orders).

Again, a line on a chart is simply made up by plotting dots. Each dot on a depth chart line represents how much can be traded at that point.

BIDs (BUY orders) are placed with dollars. I might enter that I want to buy 2.0BTC at $3300 each, but really that is a total bid size of $6600 USD for trade at $3300 or lower.

ASKs (SELL orders) are placed with bitcoins. I would enter that I want to sell 3.0BTC at $3500 or higher.

I’ve changed numbers compared to the image attached above to make calculations and understanding a bit easier.

Now the charts are cumulative. So if Alice bids 2.0 at $3300 and Bob bids 3.0 at $3400, the cumulative number of bids at $3300 is $16800 cumulative (both Bob’s $10200 plus Alice’s $6600 are for sale at that price point.).

So to plot the BIDs (Green line), at every increment along the horizontal axis (at the bottom of the chart) representing each price point, e.g., $3200, $3300, $3400, etc.) add up all the bids at that price point or below and plot that total along the vertical axis (along the left of the chart) representing total dollars of orders at the level.

The ASKs (the Red line) have the same concept but the total accumulated value shows up on the right- hand side, in terms of BTCs but stretched out so that those values correspond to the USD amounts on the left vertical axis (e.g., if the spot price of $3500, then the mark for 100 BTC of cumulative asks would line up vertically with the $350k USD mark on the left side vertical axis.)

So at any point on the Bids (Green) line, you can put your cursor there and know exactly how much you could sell (from where it sits on the left/vertical axis) at that price (from where that point sits on the bottom / horizontal axis.)

And similarly, at any point on the Asks (Red) line, you can put your cursor there and know exactly how many BTCs you could buy (from where it sits on the right/vertical axis) at that price (from where that point sits on the bottom / horizontal axis.)