What Is an Order Book?
An order book is an electronic list of buy and sell orders for a specific asset organized by price level. Buyers’ and sellers' interests are represented via order books. An order book depicts the dynamic connection between buyers and sellers by visualizing a list of outstanding orders for a specific asset in real-time. Depth and Liquidity of the order book play a crucial role in price discovery. There are typically four parts to an order book: Buy orders, Sell orders, Price and Size. The order book helps traders make more informed trading decisions.
- Buy orders contain buyer information, including all bids, the amount they wish to purchase. The Green prices represent the buying price.
- Sell orders contain seller information, including all offers, the amount they wish to sell. The Red prices represent the selling price.
- Each price level will show the given quantity of orders (Size) that participants are willing to buy or sell the asset.
- The highest bid and lowest ask prices are found at the top of the book. Coinlocally order books show the cumulative size of liquidity for each side of the market (buy/sell) up to the top of the book.
Note: The depth chart represents the number of pending orders to be filled, and it is possible that traders may cancel the orders before execution, hence predicting the trend completely according to the depth chart may not be possible. Therefore, always trade with cautious