The glass of prices and the depth of the market are similar concepts that could be called synonymous. These are related trade terms, the essence of which you just need to know, although in principle they do not affect strategy or trading.
Understanding Forex terminology
The pricing glass in the client terminal is a kind of a visual table that displays the current exchange orders. It indicates:
- contract price – quotes for which transactions are expected to be made, indicated in the “Volume” panel;
- buy or sell – here you can see the types of orders with volumes indicated by them;
- contract volume – the number of transactions concluded at a fixed (specific) price.
This data allows you to estimate the so-called market depth – a parameter in which you can place bids without affecting the price of the instrument.
Market depth is the volume of transactions (buying and selling) that will not cause a significant price change. For example, there are 100 sellers on the market who are ready to sell 1,000 units of an asset for a price in the range of 30-40 dollars. USA (no matter how much). If you buy 50 units, then with your volume you will not have any impact on the market, but if you decide to buy 500 units at once, the remaining sellers, seeing increased demand, will raise the price. The depth of the market – this is the marginal amount of the transaction, in which the impact on the price will be almost no.
Need this term to those who are engaged in speculation and shatters the market. Such a trader must understand whether he has enough available capital and leverage in order to influence the price in order to then reverse the reverse transaction at the changed prices. The trader estimates how much he needs to offer assets to maximize the price and then buy the asset cheaper.
The glass consists of 3 parts: in one there are bids for the purchase, in the other – bids for the sale. The third part is the neutral price located inside the spread. The possibilities and functionality of the glass of prices, which reflects the depth of the market, may differ depending on the broker, namely, whether it takes out orders for the external market or works according to the internal B-Book scheme. Depending on the functionality of the platform, the glass of prices may have a different look. For example, in MT4 there is no information about the volume of transactions, in MT5 this function is added.
Benefits of pricing glass:
- Displays received orders for transactions, the execution of which will not be affected by non-pricing (that is, orders are “close to the market”). It shows where the largest volumes are located. True, market makers see this as they can artificially push the price to the level they need to trigger stops.
- Helps analyze liquidity imbalances. In other words, it shows the level of excess of demand over supply and vice versa.
Market depth and price cups are ancillary tools that inform you about the state of market saturation and the weighted average price. It is often used by novice traders, while professionals prefer to use indicators that measure the depth of the market. An example is Market Depth. It is a price ladder, clearly showing the level of prices and market volumes. It can also display the consolidated liquidity of its largest suppliers, shows information about pending orders placed outside the spread.
No glass of the trading platform can display all existing orders. Therefore, in a glass, only those that are closest to the current price are displayed. And if orders are divided into market, limit and conditional, then only limit ones are reflected in the glass.
You can learn more about the depth of the market by asking your question in the comments!