Understanding Market Depth on the NSE — A Simple Guide for Every Investor

🧾 What is Market Depth?

Market depth shows how many people want to buy or sell a particular share, and at what prices.

Think of it like a queue at a supermarket:

Buyers line up with the price they’re willing to pay.
Sellers line up with the price they want to receive.

On the Nairobi Securities Exchange (NSE), this information appears in what’s called the Order Book.

📘 The Order Book — Two Sides of the Market

The order book has two sections:

🔵 Buy Side (Bids)

Shows all investor orders to buy shares, arranged from highest price to lowest.
👉 The top bid is the best buyer — the one offering the highest price.

🔴 Sell Side (Asks/Offers)

Shows all investor orders to sell shares, arranged from lowest price to highest.
👉 The top ask is the best seller — the one willing to accept the lowest price.

📊 Example: Safaricom (SCOM) Order Book Snapshot

Buyers (Bids)	Shares		Sellers (Asks)	Shares
15.20	100,000	← Best Buyer	15.25	80,000
15.15	60,000		15.30	120,000
15.10	40,000		15.35	50,000
15.05	25,000		15.40	75,000

✅ How to Read It:
The best buy (highest bid) is KES 15.20 for 100,000 shares.
The best sell (lowest ask) is KES 15.25 for 80,000 shares.
If you place a market buy order, you’ll get shares at KES 15.25.

⚖️ How Trades Happen

A trade occurs when a buyer’s bid equals a seller’s ask.

Example: If a buyer bids KES 15.25 and a seller asks KES 15.25 → the trade executes instantly.

As new bids and asks come in or get filled, the prices and quantities update automatically — that’s why the order book keeps moving in real time.

🔍 Why Market Depth is Important

Market depth reveals the hidden demand and supply strength behind the price.

Shows Buy/Sell Pressure: Many buyers at higher prices → price could rise. Many sellers at lower prices → price may drop.
Checks Liquidity: Deep order book → easy to trade large amounts. Thin order book → price moves easily.
Improves Transparency: You can see what others are offering before you act.

📑 Reading Buy/Sell Queues

🔵 Buy Queue (Bids)

Buyers waiting to purchase shares.
Arranged from highest to lowest.
Top = strongest buyer.

👉 If you want to sell quickly, match the top bid.

🔴 Sell Queue (Asks)

Sellers waiting to sell shares.
Arranged from lowest to highest.
Top = cheapest seller.

👉 If you want to buy quickly, match the top ask.

Tip: A narrow gap between top buy and sell = active market. A wide gap = low activity or uncertainty.

⚖️ Identifying Net Buyers vs Net Sellers

🟢 Net Buyers (Bullish)

Buy queue larger (more shares, higher bids).
Buyers keep raising bids (e.g., 15.20 → 15.25 → 15.30).
Buy volume heavier.

➡️ Prices likely to rise.

🔴 Net Sellers (Bearish)

Sell queue larger (more shares, lower asks).
Sellers keep reducing asks (e.g., 15.30 → 15.25 → 15.20).
Sell volume heavier.

➡️ Prices likely to fall.

Tip: If buyers appear at higher prices, demand is strong. If sellers keep flooding cheaper, supply is strong.

🎯 Using Depth Data for Smarter Decisions

Timing Entry: Strong buying → enter early; heavy selling → wait for better price.
Avoid Overpaying: Don’t bid far above the lowest ask.
Selling Smartly: Sell near top bid for faster exit; if thin depth, sell in parts.
Spot Liquidity Traps: Few orders = volatility; many = stability.
Confirm Market Sentiment: Rising bids + shrinking asks → bullish; falling bids + swelling asks → bearish.

✅ Key Takeaway

Market depth is like an X-ray of investor demand and supply.
It helps you see whether buyers or sellers are in control — and make smarter entry or exit decisions.
Before you trade, always check the depth to understand the real momentum behind the price.