What are order books and how do you read them?

July 18, 2022


Sell orders in the exchange are ranked by ascending prices, so the cheapest sell price is always located at the top of the sell order book. Ideally, a bid refers to the amount that a buyer is ready and willing to pay for an asset. Ask, on the other hand, is the maximum amount that a trader is ready and willing to buy an asset at.

Throughout the rest of this article, we will discuss the purpose of the exchange order book and how it is used to execute trades on an exchange. To become a proficient crypto investor, we will need to grasp the core concepts for how exchanges operate. Additionally, we must learn the terminology and concepts that have become standard for investors who are managing their portfolio through exchanges. Getting into cryptocurrency trading for the first time can feel like drinking from a fire hose.

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Anorder book in stock marketlists all purchase and sell orders for different assets at various price levels, along with traders involved in the trade. It provides real-time market depth data to traders and financial analysts, allowing them to comprehend market movements and make informed trading decisions. This tool is available on almost every stock and cryptocurrency exchange. An order book is a sort of electronic ledger you can find on centralized crypto exchanges. You can use them to discover what other traders are doing, have a deeper understanding of what are the possible future market developments, and better set your trading strategies. A buy wall is formed by large buy orders at a particular price, while large sell orders form the sell walls.

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The Net Order Imbalance Indicator present in TotalView can help with the technical evaluation of these securities. Traders can opt to buy or sell securities based on this information. Order books are usually divided into two parts that show you buying and selling orders, the price at which the limit orders are placed, and the number of tokens involved in each order. Here you can find the placed orders and the market depth charts in two different sections.

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In that shell, as long as you place a buy order that is not cheaper than the current how to read order book sell price in the Sell Orders book, your order will be the first to be filled. And likewise, if you place a sell order that is no higher than the current highest bid price in the Buy Orders book, your order will again be the first to be executed. Dec 23, 2022 Trading bots are automated tools that execute trades and transactions for human investors.

What is an exchange order book?

An exchange order book refers to the order books offered or displayed by a given exchange or platform, and its trading pairs. For instance, you may look at Binance's order book to check out the transactions between Bitcoin and U.S. dollars currently happening on that specific platform.

After https://www.beaxy.com/s are exchanged at the desired price, orders are withdrawn, and the market is allowed to flow freely again. Regulated markets have ways of combating these malicious market actors, but it’s important to be wary of the whales in the world of cryptocurrencies. Essentially, order books are just a list of active bids and asks on a trading platform, but analyzing the data it holds can bring all kinds of insight to both large-scale investors and day traders. Investors are constantly looking for the best prices, but sometimes exchanges with lower prices may not have the liquidity required to sustain that price for a large order. This is known as slippage and is one of the many things analyzing order books can reveal.

Understanding Order Books

It not only reveals traders who initiate trades, but it also indicates prices that each buyer and seller are ready to accept. Bid-ask SpreadThe asking price is the lowest price at which a prospective seller will sell the security. The bid price, on the other hand, is the highest price a prospective buyer is willing to pay for a security, and the bid-ask spread is the difference between them. At this point, we can already recognize the level of information that an order book has and how relevant it is for trading operations. For example, from this instrument we can obtain the minimum LINK and maximum purchase price of an asset at a given time. With that information we can be able to recognize the price spread and also the support and resistance prices of the asset.


The United States Securities and Exchange Commission can investigate it. If it discovers delinquency, the SEC has the authority to halt a deal to avoid upsetting the market in that security. SpreadsSpread is the price, interest rate, or yield differentials of stocks, bonds, futures contracts, options, and currency pairs of related quantities. The lowest price is the lowest price that sellers are willing to accept for the asset. In this case, we have chosen the Binance exchange, with the BTC/USDT pair and, therefore, the Atani order book shows us the information of this particular exchange and cryptocurrency pair. This section is available in the Advanced and Pro trading experiences of Atani.

Crypto Order Books

With more limit buy orders coming in, the order book indicates that market participants turn bullish. Should the sell side increase, the order book reveals that additional pressure on the price could be a possible outcome. The stock market is made up of millions of traders who execute trades every day. Therefore, as a trader, knowing how these participants are allocating their funds in a particular asset will help you make better decisions. The system that matches buy orders with sell orders, called the matching engine, uses the order book to execute trades for participants of the exchange. The order matching system is the core of all electronic exchanges and determines the efficiency and robustness of the exchange.

And, as we go down, the liquidity increases because there are those who want to buy or sell at more attractive prices for their own trading strategies. If a specific price level has a lot of buyers, such a price level is usually seen as a strong support level. On the other hand, if there are more sellers at a particular price, it is known as a price resistance level. Combining this with price action and whatever indicators you use could help you make more informed decisions. On the surface, order books only present the price, total size, and the number of orders at a particular price level.

How do we use the exchange order book?

For every security traded, there is a buyer and a seller, and a “bid” and “ask” price. The price at which the buyer is willing to pay for a security is the bid, and the price at which the seller is asking for the security is the ask. An order book takes all the pricing information of these different trades and aggregates them according to price and volume for you to analyze while making investment decisions. TotalView also provides historical trading volumes and prices for different securities.

To this end, groups of traders and wealthy individuals regularly create buy and sell walls to manipulate the markets. On the other hand, an order book’s sell side contains all sell orders that are not yet traded (‘open’) and are placed above the current market price. When you open an ask, you are essentially saying, “I want to sell X amount of this token for Y price.” The trade then occurs once your ask matches someone’s bid. Order books continue to collate an increasing amount of information for traders for a fee.

  • Again, this tool shows you the amount of large scale orders in that period and is a good thing for most traders.
  • The offers that appear in this table are from partnerships from which Investopedia receives compensation.
  • But if the price drops, this lower specified amount will stay the same.
  • Before making any conclusions about momentum, you should watch the order book and other data for some time.
  • An exchange order book is a digital ledger that displays all buy and sell orders for a particular cryptocurrency on a specific exchange.

A buy or how to read order book order which must be executed immediately in its entirety or else it will be cancelled. The Structured Query Language comprises several different data types that allow it to store different types of information... With the instant market update characteristic of an order book, orders can be matched automatically depending on the trader’s preference. Sell orders resemble buy orders, but instead include all the offers or where people are willing to sell. Buy orders contain buyer information including all the bids, the amount they wish to purchase.

A market order XLM is an order that is placed to buy or sell a financial instrument at the current going rate of the market. For example, let's say that the current market price for a share of Apple is $300, if you place a buy order at the current market price then the trade will execute and buy the share for $300. Order books were originally used in stock exchanges but are now becoming popular in cryptocurrency trading as well (i.e., Bitcoin). The books are usually electronic, making them available online for traders worldwide.

An order book is an electronic or written list of all the buy and sell orders investors have made for a particular security. It lists the prices buyers and sellers are willing to pay, and how many orders are submitted for the particular price. Investors use order books for technical analysis of potential investments. For example, knowing the prices and the volume of orders behind those prices can indicate which direction or trend the underlying security may move. An order book is actually a list of the different operations that take place in a market or exchange on a given good or asset in real time.


The bid column shows the current highest bid price, while the ask column shows the current lowest ask price. The difference between the bid and ask prices is known as the spread, and it represents the potential profit that a trader could make by buying at the bid price and then selling at the ask price. An important fact to note is that bid and ask prices are constantly changing, so it is crucial to pay attention to the market and watch out for these changes. Order or continuous books provide open offers and order history for a particular asset at all price levels and total volumes. Order books are useful for traders because they help gauge the buyer and seller interest at specific price levels. This data can provide valuable information about potentialsupport andresistance levels.

Knowing how to read and interpret an order book's information can help you understand the short-term happenings and trends in a crypto market. However, reading and correctly interpreting the information in the book requires patience and practice. The order book shows potential imbalances between the pending buy and sell orders, which can provide clues in what direction the price may move in the short term.

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