Market depth (DOM) analysis: reading the order book

The tape shows what already traded. Market depth shows what is waiting to trade — the resting limit orders queued at each price on both sides. Read together, the two answer different halves of the same question: what participants have done, and what they say they intend to do.

What the order book shows

The DOM (depth of market) — also called Level 2 or the order book — lists resting limit orders at each price level: bids stacked below the current price, asks stacked above it. For each level you see the price, the total quantity resting there, and the number of orders it is split across. On NSE's standard feed you get five levels per side, commonly called L5 depth.

Five levels is a narrow window, but on instruments as liquid as NIFTY and BANK NIFTY futures it is a busy one. The near book is where the immediate contest happens — where aggressive market orders from the tape collide with passive resting size.

Stacking and pulling

A static snapshot of the book is the least interesting part of order book analysis. The information is in how it changes:

• Stacking: size building up at a level faster than it trades away — participants adding passive interest, often visible as bid-ask stacking that skews one side of the book.
• Pulling: displayed size being cancelled as price approaches — the level that looked solid a moment ago quietly evaporating before it is tested.
• Refilling: a level that keeps trading yet keeps restoring its size — the classic footprint of an iceberg order showing only a slice of its true quantity.
• Imbalance: total resting depth persistently heavier on one side of the book than the other across the visible levels.

Depth is intention. Prints are fact.

Here is the caveat that separates careful DOM readers from naive ones: a resting order costs nothing to display and nothing to cancel. Depth is a statement of intent that can be withdrawn at any moment — and sometimes it is displayed precisely to be withdrawn. Executed trades, by contrast, are irreversible commitments (more on this in bid-ask imbalance).

The book can also understate reality. Iceberg and disclosed-quantity orders show only a fraction of their size, so a thin-looking level can absorb far more than it displays — behaviour covered in absorption. In both directions, the displayed number is a claim, not a fact.

A descriptive read, not advice

In practice, most experienced index traders don't stare at raw depth numbers all day. They watch for the handful of moments when the book's behaviour changes character — a side that starts stacking after hours of thinning, a large level pulled seconds before a test, a quiet price that keeps refilling against steady selling. Those transitions are what depth tooling is built to surface.

Everything the DOM shows is descriptive data about current market structure: where resting orders sit, how they are changing, and how they behave under pressure. It does not say what price will do, and nothing about it tells you what to trade. TBTflow presents depth the same way it presents the tape — as analytics that map what participants are doing, with every decision about acting on it left entirely to you.