Order Book
An order book is the live list of buy and sell orders (bids and asks) for a market. It shows available prices and sizes across levels.
Definition
An order book is a real time record of buy orders (bids) and sell orders (asks) for a market, organized by price levels.
What it shows
• The best bid and best ask, which define the bid ask spread and midquote.
• The available size at each price level, which is the market’s depth.
Why it matters for costs
The order book determines whether you can execute at the top of book or whether you will experience slippage. Thin order books often lead to larger effective spreads.
Common pitfalls
Watching only the last trade: The last traded price can be stale. The order book tells you what is tradable now.
Ignoring depth: A tight spread does not guarantee low costs if there is little size available at the best prices.