The depth of market window on retail platforms: what it really shows

[Shadow Trader]

Many retail platforms offer a depth of market window that displays bids and offers at several price levels. It looks like the order book on an exchange, and it is tempting to read it that way. In spot FX, it usually is not.

What gets displayed is typically the depth from a single broker or from a small group of liquidity providers feeding that broker. It does not represent the whole market. Quotes can appear and disappear in milliseconds, and the size shown may be indicative, not firm.

Treating this window as a map of where big orders sit can lead to bad conclusions. A large visible bid might be gone before an order reaches it. A lack of visible offers might mean nothing more than a quiet feed.

It can still be useful as a sanity check for liquidity, for example to see whether depth thins dramatically before news. But reading intent into it is a stretch.

If the platform shows the source of each quote, it may be possible to see how many providers contribute. A window with only one or two sources is a feed from a narrow slice, and its sizes mean even less.

Has the depth window on your platform ever predicted a move, or does it mostly flicker without telling you anything?