The process of analyzing market depth through bid / asks table traditionally was known as tape reading.
Nowadays, tape reading process by itself is not a reliable trading strategy.
You can instead use it as a final check point for deciding on your trade entry point and size.
The top 5 levels of bid and asks seen on your retail trading terminal has no sufficient data for making an informed trade decison.
To fully make use of this process, you need to have access to level 3 data of NSE realtime data which gives you upto 20 levels of bid and asks.
Moreover,
When a large order is placed with a disclosed quantity condition, the order size is not reflected on the market depth table.
With plenty of automated algos, let to roam freely on the exchange servers to buckle up the retail trader, the order data on this table mostly represents dummy orders that are modified or canceled just a microsecond before they are about to get executed, for the fun of trapping the retail traders to buy at high and sell at low.
I had a bad experience yesterday (18-Oct-2019) on NSE while trading using market depth information. I was short on ZEEL at 12:10. The market depth information showed 1 crore 50 lakh supply and 15 lakh demand. So, naturally I expected the stock to hit its lower circuit of 238.05. But within 10 seconds, the market depth changed drastically. The supply dropped to 25 lakh within 10 seconds, and the stock started moving up. Within another 30 seconds, the demand increased to 30 lakhs and supply dropped to 16 lakhs. The stock shot up from 240 to 259 in the next 30 minutes without any pull back. I guess someone flooded the system with dummy sell orders between 10:30 to 12:00 noon to get the retail traders to sell lower and lower, and then swooped in at 12:15 to buy up the stock at the lower prices. I don’t think the exchanges have any safeguards against such manipulation. Possibility of manipulation of market depth by big players (fund houses?) is something to be kept in mind if you are using market depth information to make your trading decisions.
You should never trade only based on market depth.
before, in my paper trade time, may be last year, i used to check market depth & trade accordingly. but one day i found totally opposite scenario, just like the above you have mentioned. Sell orders were around 50 lakhs & buy orders are around 12 lakhs but still market was going upwards.
So in my opinion, in intraday trade, let the first market decide where it is heading. up trend or down trend. this you can confirm by Price Action , Support & Resistance level , Multiple time frames, Volumes & market depth etc. then trade accordingly with small quantities.