orderbook

An order book is a real-time record used by exchanges and trading platforms to display all outstanding buy and sell orders for a specific asset. It organizes orders by price and size, separating bids (buy orders) from asks (sell orders). The book provides visibility into liquidity and plays a key role in price discovery, helping participants gauge potential price movement based on available supply and demand.

The structure of an order book presents price levels with the corresponding available quantities. Bids are sorted from highest to lowest price, while asks are sorted from lowest to highest price. The highest bid and the lowest ask create the best bid and best offer, collectively forming the bid-ask spread. Orders are matched by a matching engine using price-time priority: more favorable prices and earlier orders have priority. Market orders execute immediately against the visible liquidity, while limit orders rest in the book until they can be matched or canceled. Partial fills can occur when an order is larger than the available opposite-side volume at a given price.

Usage and implications: Traders use the depth of the book to assess liquidity, potential price impact, and momentum. Depth information helps gauge support and resistance levels and the likely path of price movement for large trades. Some venues expose full depth-of-book data, while others display only top levels; data is often categorized as level 1, level 2, or level 3. Hidden liquidity, iceberg orders, and dark pools can obscure true depth. The order book, together with recent trades and price history, underpins price formation and market microstructure.