Order book definition

An order book is a real-time list of the buy and sell orders waiting at each price for an instrument. It shows the prices and quantities that buyers are bidding and sellers are offering.

The buy side lists bid orders and the sell side lists ask, or offer, orders. The highest bid and the lowest ask form the best available prices, and the gap between them is the spread.

A deep order book holds large volume across many price levels, so big trades fill with little price movement. A thin order book holds little volume, so the same trade can move the price and cause slippage. The order book shows resting orders waiting to trade; the market price shows where trades are actually happening.

Order book Example

A stock shows these best prices in the order book:

Best bid: USD 49.95 Best ask: USD 50.00

To sell immediately, you sell at USD 49.95. To buy immediately, you buy at USD 50.00. The spread is USD 0.05.