When you log into your broker’s site and request a share quote, you will receive the current bid and asking price as well as the market depth.

The information you see on this screen is as follows –

Bid – This is the highest price someone is willing to pay.

Offer – This is the lowest price someone is willing to sell at.

Last $ - This was the last sale price.

Change – Change from previous business day’s close.

Open $ - The opening price.

High / Low $ - The highest and lowest sale price of the day.

Volume – The volume of shares traded that day.

The highest price on offer at the moment is the current bid price. Looking at the market depth table, you can see that there are 104 people or organisations currently willing to pay this price. This is the number in the Number column. Similarly, there are just 3 sellers willing to sell at $8.76.

The most important summary you can draw from the market depth chart is who is dominating – the buyers or the sellers. With BHP, looking at the top three spots you can see that there are 271777 shares wanting to be purchased but only 166557 shares waiting to be sold. In effect, there is a demand in this market for a further 105220 shares near the current sale price. The buyers are dominating this stock at this point in time. If the buyers are dominating, this will often force the price up. If the sellers are dominating, this will often force the price down.

How is this of use to you? 80% of the market turnover is by institutional investors. With extensive information resources at their disposal, they have the opportunity to react to market sensitive news faster than you do. If you make a decision to buy and see the market depth forcing the price down, perhaps it is advisable to wait and see what the market will do for this stock. If you make the decision to sell and the market depth is forcing the price up, then holding off temporarily may give you a higher sell price. If the market depth agrees with your decision, then this is further confirmation in your decision process.
To take full advantage of the information market depth can provide, you would need access to the computer during the day.