How Does “Market Depth” Relate to the Potential for Slippage?

Market depth refers to the volume of buy and sell orders at various price levels around the current market price. High market depth (many orders near the current price) means the market is liquid and can absorb large trades with minimal price movement, thus reducing the potential for slippage.

Low market depth means large orders will "walk the book," causing significant slippage.

What Is the ‘Slippage’ Risk Associated with Poor Market Depth?
Explain the Role of Liquidity Providers in Reducing Slippage in Derivative Exchanges
Can Limit Orders Completely Eliminate Slippage Risk?
How Does a Large “Order Book Depth” Help to Mitigate Slippage?
How Does the Order Book Depth Relate to the Potential for Slippage?
What Is ‘Market Depth’ and Why Is It Important for Large Trades?
How Does a Whale Movement Affect the ‘Order Book Depth’ of an Exchange?
Why Is High Liquidity Essential for Effective Arbitrage in Crypto Markets?

Glossar