Order Book
An order book is a tool that displays all active buy and sell orders for an asset on an exchange. In the order book, you can see at what prices and volumes market participants are ready to make trades right now.
Using the order book, you can assess real supply and demand, choose the optimal price for a trade, and understand market sentiment.
Order Book Components
The order book is divided into two parts:
Sell orders (Ask) — located in the upper part of the order book, above the current price. Here sellers indicate the minimum price at which they are willing to sell the asset.
Buy orders (Bid) — located in the lower part of the order book, below the current price. Here buyers indicate the maximum price at which they are willing to buy the asset.
Spread — the difference between the current sell price and the current buy price. The spread is located between the two parts of the order book.
Order Book Example
Sell (Ask)
100.52 → 500 units
100.51 → 1,200 units
100.50 → 800 units
─────────────────── ← Spread (0.02)
100.48 → 1,000 units
100.47 → 600 units
100.46 → 300 units
Buy (Bid)In this example:
Current sell price — 100.50 (closest to the spread from above)
Current buy price — 100.48 (closest to the spread from below)
Spread — 0.02 (100.50 − 100.48)
Information Displayed in the Order Book
In each order book row you see:
Price — at what price participants want to buy or sell the asset
Volume — how many units of the asset are ready to be bought or sold at this price
Market depth — number of orders at different price levels (the more orders, the higher the asset's liquidity)
Why Use the Order Book
The order book helps you:
See real supply and demand — understand how in-demand the asset is right now
Assess liquidity — find out how easy it is to buy or sell the asset without significant price change
Find the optimal price — choose the right price to enter a trade
Understand market sentiment — determine whether there are more buyers or sellers
Choose a strategy — decide whether to use a market or limit order
How to Read the Order Book
Order Volumes
Large volumes at one level may indicate a support level (if these are buy orders) or resistance level (if these are sell orders) — a price the asset is unlikely to pass in the near future.
Evenly distributed volumes indicate a stable market without clear points of interest from large participants.
Spread Size
Narrow spread means high asset liquidity. You can easily buy or sell the asset close to the current price. Your trade will not significantly affect the market.
Wide spread means low asset liquidity. It's harder to find a counterparty for the trade. Your trade may noticeably change the price.
Order Balance
Predominance of buy orders — there are more buyers in the order book and their volumes are larger. This may indicate a future price increase.
Predominance of sell orders — there are more sellers in the order book and their volumes are larger. This may indicate a future price decrease.
Approximate equilibrium — the number and volume of buy and sell orders are roughly equal. Sharp price movements are not expected.
⚠️ Important Order Book Features
Orders can be canceled at any time. A market participant can place an order and remove it a second later. The order book shows the situation only at the current moment in time.
False orders are possible. Large participants (market makers, traders with large capital) sometimes place large orders to create the illusion of supply or demand, and then cancel them. This is called "spoofing."
Recommendation: Do not make trading decisions based solely on the order book. Use it together with other analysis tools: price chart, trading volumes.
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