What is an order book?
In one line: An order book is the live list of waiting buy orders and sell orders for a market, sorted by price, with how much is wanted at each price.
A simple example
Think of it as two queues. Buyers on one side, sellers on the other.
| Buyers (bids) | Price | Sellers (asks) |
|---|---|---|
| $10.03 | 900 shares | |
| $10.02 | 400 shares | |
| 300 shares | $10.00 | |
| 1,200 shares | $9.99 |
The best buyer pays $10.00. The best seller wants $10.02. The gap between them is the Spread, here 2 cents.
Say you send a Market order to buy 600 shares. You take all 400 at $10.02. The last 200 fill at $10.03. Your average price is about $10.023, not $10.02.
Why it matters
The order book shows you where the waiting orders sit. A thin book (small sizes) means a big order moves price further. A thick book soaks it up.
That's what traders mean by Liquidity. More waiting orders usually means tighter spreads and smaller surprises when you get in or out.
In stocks, the deeper view is called Level 2. On most crypto exchanges, the full book is shown for free.
A common mistake
Treating a big order on the book as a promise. A wall of 50,000 shares at $9.95 can vanish in a blink. Orders can be changed or cancelled at any time before they fill. Some of what you see may also be hidden, because many venues allow orders that don't show their full size.
So use the book as a clue about the next few cents, not a forecast. Where price turned around on the chart still matters more. Our support and resistance guide shows how to mark those places.
Before a market order in a quiet stock, glance at the top 3 price levels. If your size is bigger than what's there, a Limit order may be the calmer choice.
Questions
What is the difference between an order book and Level 2?
They show the same idea. "Order book" is the general name, common in crypto. "Level 2" is the name stock platforms use for the deeper list of bids and asks.
Can you see every order in the order book?
Not always. Some orders are hidden or show only part of their size, and orders on other venues may not appear. Treat what you see as a partial picture.
Does the order book predict price?
No. It shows waiting orders right now, and they can be cancelled. It can help with getting in and out, but it doesn't tell you where price will go.
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