An order book is the ladder of resting bids and offers at each price. Depth is how much sits on it within a given distance of the current price. Price tells you where the market last agreed; depth tells you what it would cost to move it, and it is the more actionable of the two for anyone transacting in size.
The practical measure is slippage: the difference between the price quoted and the average price actually achieved on an order that consumes several levels of the book. A market with deep books absorbs a large order with little movement. A thin one does not, and the cost of crossing it can exceed every fee involved by an order of magnitude. This is why daily volume is a poor guide to how much can be traded now — volume accumulates over a day, while depth is what exists at this instant.
Depth is also where sharp moves come from. When resting liquidity is thin, a modest order can travel through several levels, and the resulting price move triggers stop orders and liquidations that produce more market orders into an already thin book. The cascade is a liquidity event rather than a repricing, which is why such moves so often retrace quickly once passive liquidity returns. Attributing them to a headline that happened to land nearby is a common error; the headline was the trigger, the empty book was the cause.
Two structural features of this market make books thinner than they look. Liquidity is fragmented across venues, so the depth visible on any one of them understates the total and overstates what is accessible from a single account. And a large share of resting orders comes from market makers who quote continuously and withdraw during volatility — which means depth is at its lowest exactly when it is needed. Measured book depth in calm conditions is not a forecast of depth in stressed ones.
Reading a book requires some scepticism about what is displayed. Orders can be placed and cancelled freely, and layering large orders with no intention of executing them — spoofing — is a documented practice on venues without surveillance obligations. A wall of resting bids that disappears as price approaches was information about intent, not about liquidity. Depth aggregated over time, or measured by what actually executes, is more reliable than a snapshot of the ladder.
The habit worth building is to check depth before size. Before assuming a position can be exited at the screen price, look at what is resting within a tolerable distance on the venue you would actually use, in the pair you would actually trade. For large assets on major venues the answer is usually reassuring. For anything outside the top of the market it frequently is not, and the gap between the quoted price and the achievable one is the difference between a plan and a hope.