Order Book

November 21, 2023 - Around 2 mins mins to read

Understanding the Order Book

The order book is a digital record of the buying and selling activity of an asset on a trading platform, specifically a cryptocurrency exchange. It provides a comprehensive overview of a particular asset by documenting both buy and sell orders. Trading platforms with electronic order books utilize a matching engine to automatically process and complete these orders, either in full or in part.

An order book contains various essential details about an asset. It is divided into sections for buyers and sellers, as well as a bid and ask section. The “asks” represent sell requests, while the “bids” indicate buy orders.

The bids are listed on the left side of the book, while the asks are on the right. Each side displays the buy and sell prices from different traders. Bids are typically shown in green, while asks are shown in red.

Different visualization methods, such as tables, line charts, and bar charts, are used to depict the interaction between buyers and sellers. Additionally, an order book is often accompanied by Japanese candlestick charting, which provides information about the current and past market conditions. This assists traders in making well-informed trading decisions. It’s important to note that order books only include orders that are set to be fulfilled at specific prices determined by the trader.

These specific orders are referred to as limit orders. Conversely, market orders are placed to be fulfilled at the current market prices. The highest bid prices and lowest ask prices are displayed at the top of the order book. The difference between these two prices is known as the bid-ask spread, which indicates the strength of supply and demand.