Market depth refers to the market's ability to sustain relatively large market orders without impacting the price of the asset significantly. It shows the number of buy and sell orders at various price levels for a specific asset, providing insight into supply and demand dynamics. A deeper market indicates more liquidity, meaning traders can buy or sell without causing drastic price changes. Traders often analyze market depth using a order book, which lists all pending buy and sell orders. This information helps them gauge market sentiment and make informed trading decisions. Understanding market depth is crucial for both investors and traders looking to optimize their strategies.