Market Depth Trading: Reading the Top Five Bids and Offers Before You Place an Order

Open any stock on your broker’s app and tap it once. Below the price sits a small grid of numbers in green and red, five rows on each side, and most of us scroll right past it to hit Buy. That grid is the market depth, and market depth trading simply means looking at it before you place an order: who is waiting to buy, who is waiting to sell, at what prices, and in what size. It takes ten seconds. On a thinly traded stock, those ten seconds can save you more than the brokerage on the whole trade.

This guide covers what each column means, how NSE actually matches your order against the book, a worked example of what a market order really costs once it eats through more than one row, and the limits of what the screen can tell you. The matching rules come straight from NSE’s page on its equity trading system, and the screen layout follows Zerodha’s support note on the market depth window. Other brokers’ screens look slightly different, but the data underneath is the same.

What market depth trading shows you on the screen

The standard depth window shows the best five bids and the best five offers for a stock or F&O contract. Bids are the buy orders waiting in the exchange’s book, sorted from the highest price down. Offers, also called asks, are the waiting sell orders, sorted from the lowest price up. Zerodha’s Varsity module on how a trading platform works puts it plainly: the bid and ask prices are the prices you can actually transact at, and the top five of each are shown by default.

Each row has three numbers:

• Price: the limit price at which those orders are sitting.
• Qty: the total quantity available at that price, added up across every order there.
• Orders: how many separate orders make up that quantity.

Around the grid you’ll usually find the day’s open, high, low and previous close, the volume traded so far, the average traded price (which Zerodha’s note points out is the VWAP), the last traded quantity and time, and the day’s lower and upper circuit limits. For derivatives you also get the expiry and open interest.

The Orders column is the one people ignore, and it’s quietly useful. If 5,000 shares sit at one price in a single order, that’s one participant who can cancel with a click. If the same 5,000 shares come from 40 orders, the interest is spread out and less likely to vanish all at once. Neither tells you intent for sure, but they read very differently.

How NSE matches your order against the book

You can’t read the depth properly without knowing what the exchange does with it. NSE’s trading system page lays the rules out, and three of them matter here.

Price-time priority. Unmatched orders are stored by best price first and, within the same price, by time. The highest bid and the lowest offer are at the front of the queue. If two orders sit at the same price, the one entered first gets filled first.

Best buy meets best sell. The best buy order is matched with the best sell order, and one order can match partially against several others, creating multiple trades. That is exactly what happens when your order is bigger than the top row.

Trades happen at the passive order’s price. NSE calls orders already resting in the book “passive” and incoming orders that hit them “active”. Orders are always matched at the passive order price. So if the best offer is ₹412.40 and you send a buy limit at ₹413, you don’t pay ₹413. You pay ₹412.40 for whatever quantity sits there, then the next row’s price, and so on up to your limit.

The depth window isn’t a forecast. It’s the queue your order is about to join, or the queue it’s about to cut through.

The same NSE page describes the order conditions you’ll see in your order form. A Day order lapses at the end of the trading day if it isn’t matched. An IOC (immediate or cancel) order fills whatever it can as soon as it reaches the market, and the unfilled portion is cancelled at once. A market order buys or sells at the best price obtainable when it’s entered, while a limit order lets you set the price. A stop-loss order stays out of the market until the trigger price is reached or crossed. NSE also notes that GTC and GTD orders aren’t currently available on its system as per SEBI directives.

A worked example: reading a five-level book

Let’s use a made-up stock, ABC Ltd, trading around ₹412. These numbers are illustrative example data, not a real quote. Here is the depth window at one moment:

Step 1: the spread. Best offer ₹412.40 minus best bid ₹412.30 gives a spread of ₹0.10. The midpoint is ₹412.35, so the spread is about 0.024% of the mid price. That’s a tight, liquid-looking book.

Step 2: the size on each side. The five bid rows add up to 3,250 shares and the five offer rows to 2,500 shares. More is waiting to buy than to sell within these five levels. Hold that thought, because we’ll come back to why it doesn’t mean as much as it seems.

Step 3: what a 1,500-share market buy really costs. The top offer only has 300 shares. Under the matching rules above, a market buy for 1,500 shares walks up the offer side:

• 300 shares at ₹412.40 = ₹1,23,720.00
• 450 shares at ₹412.45 = ₹1,85,602.50
• 600 shares at ₹412.50 = ₹2,47,500.00
• 150 shares at ₹412.60 = ₹61,890.00

Total outlay is ₹6,18,712.50, an average of ₹412.475 a share. Had all 1,500 shares filled at the best offer of ₹412.40, you’d have paid ₹112.50 less. Against the midpoint, the average fill is about 0.03% higher. Small here, because the book is deep. That’s the point: the depth window let you work out the slippage before the order went in.

Step 4: the same trade on the sell side. A 1,500-share market sell would hit 500 at ₹412.30, 350 at ₹412.25 and 650 at ₹412.20, for ₹6,18,367.50, an average of ₹412.245. That’s ₹82.50 below what you’d get if the whole lot sold at the best bid.

Step 5: now picture a thin stock. Say a small-cap shows a best bid of ₹87.10 for 40 shares and a best offer of ₹87.90 for 25 shares. The spread is ₹0.80, roughly 0.91% of the midpoint, before the price has moved at all. Buy at the offer and sell at the bid straight away, and you’re nearly 1% down on the round trip. A market order for 500 shares here could climb several rows and land well above the screen price. This is where a limit order earns its keep.

What the depth can’t tell you

The window is honest about what it shows. It’s the gaps you have to keep in mind.

Five rows is a small slice. In the example, 1,500 shares fit inside the visible offers. Bigger orders, or illiquid option strikes, can run past row five. Zerodha’s Kite offers a “View 20 depth” option showing the best 20 bids and offers, and Varsity’s note on 20 market depth walks through an option strike where the visible five rows looked thin but most of the quantity sat below the eighth row. The book was there. The standard screen just didn’t show it.

Some quantity is deliberately hidden. NSE allows a disclosed quantity condition, where only part of an order is displayed at a time. NSE’s own example is a 1,000-share order with a disclosed quantity of 200: the market sees 200, and when that trades, the next 200 is released. Per Zerodha’s disclosed quantity note, for NSE and BSE equity the disclosed portion can’t be less than 10% of the total order, and the feature isn’t available for NSE F&O, where brokers offer iceberg orders instead. So a modest-looking row can be the visible tip of something much larger.

Orders can be pulled. NSE’s page notes that a resting order stays in the system until it’s fully matched or cancelled by the member. Nothing forces a big bid to stay put while you decide. A wall of buyers at one price can disappear the moment the price gets close, so treat any single large row with some scepticism.

Totals move both ways. The total bid and offer quantities reflect what traders currently intend to trade, and they keep changing through the day. Traded volume can only go up. The two measure different things, which is why a bid-heavy book (like our 3,250 against 2,500) is a snapshot of waiting orders, not proof that the price will rise.

A bid-heavy book is a snapshot of who is waiting, not a promise about where the price goes next.

Using the depth before you place an order

Here’s how we’d use the window in practice, with no prediction involved.

Size your order to the book. Add up the offers (for a buy) until you reach your quantity, and note the price of the last row you’d touch. If that’s further away than you’re comfortable with, split the order or use a limit price.

Default to limit orders in thin names. A limit order caps your worst price. Because trades execute at the passive price, a buy limit slightly above the best offer still fills at the resting offer prices, not at your limit, as long as the quantity is there. You get price protection without giving up much.

Check the spread against your target. If you’re aiming for a 1% move in an intraday trade and the spread is 0.9%, the trade barely makes sense. In our ABC example the spread was a rounding error. In the thin small-cap example it ate almost all of a 1% target.

Know your tick size. Orders can only be entered in the price steps the exchange specifies, a power set out in NSE’s capital market trading regulations, so the tightest possible spread is one step. Our guide to tick size for NSE stocks explains how those steps are set. If a stock’s spread stays several steps wide all day, that tells you liquidity is thin.

Look at the average price too. The VWAP figure in the depth window tells you where the bulk of the day’s trading has happened. If you’re buying well above it, you’re paying up versus most of today’s buyers. Our VWAP trading strategy guide covers how traders use that line.

Watch the circuit limits. The upper and lower circuit shown in the window is the price range the stock can trade in for the day. No order can fill outside it, so when a stock sits at one of those limits, the depth on that side tells you how many people are stuck waiting at the edge.

A short checklist

1. Open the depth before every order, not just the big ones.
2. Note the spread and work it out as a percentage of price.
3. Add up the rows on the side you’ll hit until you cover your quantity.
4. Use a limit order whenever your quantity runs past the first row or the spread looks wide.
5. Don’t trust one huge row. Check the Orders column and expect it may move.
6. Remember that hidden quantity and rows beyond five exist.

None of this tells you which way a stock will go. What it does is stop the quiet leak that comes from paying the spread and slippage without noticing. For the bigger picture on keeping losses small, see our pillar guide on risk management in trading.

Disclaimer: This article is for information and education only and is not investment advice or a recommendation to buy or sell any security. The order matching rules and order conditions are summarised from NSE’s equity trading system page, and the price-step rule from NSE’s capital market trading regulations, and the depth screen fields, 20-depth feature and disclosed quantity limits come from Zerodha’s support pages, Kite user manual and Varsity. ABC Ltd, the small-cap quote and all prices and quantities in the examples are hypothetical example data, and the calculations are our own arithmetic. Trading carries risk, so consult a SEBI-registered investment adviser before making investment decisions.