Order Book

An order book is a real-time list of buy and sell orders for an asset (stocks, bonds, currencies, or cryptocurrencies). It shows the price levels, quantities available at each level (market depth), and—when visible—the market participants behind those orders. Order books increase market transparency and help traders assess supply and demand.

Key takeaways

• Order books display bids (buy orders), asks (sell orders), and recent trade history.
• They are dynamic and update in real time (the “continuous book”), with separate opening and closing books consolidated at market open/close.
• Traders use order books to identify price levels, liquidity, potential support/resistance, and short-term order imbalances.
• Hidden liquidity (e.g., dark pools) limits how representative the visible book is of true supply and demand.

How an order book works

• Orders are entered as bids (prices buyers are willing to pay) or asks (prices sellers are willing to accept).
• The highest bid and lowest ask appear at the top of the book (top-of-book); the difference between them is the bid-ask spread.
• Market depth shows quantities available at multiple price levels, revealing how much volume would be required to move price.
• Exchanges maintain a continuous book during trading hours and may keep separate opening and closing books for auction price discovery. At open/close, these books are consolidated to determine a single opening or closing price.

Reading an order book

Main components:
* Bids (buy orders): price levels and quantities buyers want.
Asks (sell orders): price levels and quantities sellers want.
Order history/trade tape: executed trades and prices.

Practical uses:
* Identify immediate liquidity and the size of orders at each price level.
Detect imbalances—clusters of large buy orders can indicate short-term support; clusters of large sell orders can indicate resistance.
Infer whether retail traders or institutions are driving activity (when brokerage or participant IDs are visible).
* Combine with price charts (e.g., candlesticks) to confirm short-term signals.

Special considerations

• Dark pools and hidden orders: large traders often use non-displayed venues or hide order size to avoid market impact. This reduces the completeness of the visible order book.
• Not all liquidity is public—visible orders may understate actual supply or demand, especially for large institutional trades.
• Level of detail matters: some market data subscriptions provide deeper order book visibility (more price levels and liquidity) useful to active traders but unnecessary for most retail investors.

Example use cases

• Day traders monitor order book imbalances and top-of-book changes to time entries and exits.
• Institutional traders rely on deeper feeds to execute large trades with minimal market impact.
• Casual investors mainly use price charts and executed-trade history; detailed order book data is often not critical for long-term strategies.

Quick glossary

• Bid: price a buyer is willing to pay.
• Ask (offer): price a seller is willing to accept.
• Spread: difference between best ask and best bid.
• Market depth: available volume at successive price levels.
• Top-of-book: the best (highest) bid and best (lowest) ask.

An order book is a core market tool that, when interpreted properly and used alongside other data, helps traders evaluate liquidity, potential price levels, and short-term market direction.