What Is an Order Book?
An order book is a real-time, continuously updated ledger of all pending buy and sell orders for a trading pair on an exchange. The buy side (bids) lists orders from highest to lowest price. The sell side (asks) lists orders from lowest to highest. The order book reveals the supply and demand structure of the market at every price level.
How the Order Book Works
When a market order arrives, it's matched against the best available orders on the opposite side. A market buy eats into the ask side; a market sell eats into the bid side. The order book depth — the total volume of orders at each price level — determines how much a market order will move the price.
Why It Matters for Traders
Reading the order book gives traders insight into market microstructure that price charts alone can't show. Large bid walls suggest support levels; large ask walls suggest resistance. However, orders can be placed and cancelled instantly (spoofing), so order book analysis requires understanding both genuine and deceptive order patterns.