Market Depth
Market Depth — Volume available near best prices — collapses precede volatility spikes.
Definition
Market Depth refers to volume available near best prices — collapses precede volatility spikes. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Price formation at the venue layer decides whether a signal survives implementation. When volume available near best prices — collapses precede volatility spikes shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what market depth is saying. If volume available near best prices — collapses precede volatility spikes moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Measure spread, queue, and impact at your size; paper fills are not a desk edge. Prefer a short written null hypothesis for Market Depth: what would falsify the current reading in the next window?
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