The order book: who wants what, at what price
Read the list of waiting buy and sell orders that every exchange keeps, and see how a big order eats through it level by level.
Order book
The list of all waiting (resting) orders for one asset. It has two sides. The bid side holds buy orders, highest price at the top. The ask side, also called the offer, holds sell orders, lowest price at the top. Each row is one price level and the total size waiting there.
A row that reads 99.90 × 300 on the bid side means buyers are waiting to buy 300 shares in total at 99.90. It could be one buyer or thirty.
ASK 100.30 × 300
ASK 100.20 × 400
ASK 100.10 × 200 ← best ask
----------------------------
BID 99.90 × 300 ← best bid
BID 99.80 × 500
BID 99.70 × 200Best bid 99.90 · best ask 100.10This is the example book for lessons 2 to 4. Sellers sit above the line and buyers below it. The two prices closest to the line are the ones that matter most: they are where the next trade can happen.
Check yourself
In the example book, what is the best bid?
- 99.70
- 99.90
- 100.00
- 100.10
Show the answer
99.90
Right. The best bid is the highest price any buyer is waiting to pay: 99.90, for 300 shares.
THE TWO BEST PRICES
Why bid and ask never overlap
The best bid (99.90) is the most anyone will pay right now. The best ask (100.10) is the least anyone will sell for right now. The best bid is always below the best ask. If a buyer ever bid 100.10, they would simply trade with the seller there and both orders would leave the book. At one price level, orders wait in a queue: whoever arrived first is filled first. This rule is called price-time priority.
Two buyers both bid 99.90, Ali at 10:01 and Mina at 10:03. When a seller comes down to 99.90, Ali's order fills first. Mina waits until Ali's order is done.
Check yourself
The best ask is the highest price any seller in the book is asking.
Show the answer
False
False. The best ask is the lowest price any seller is asking, 100.10 in the example. It is the best for a buyer, which is why it sits closest to the bids.
DEPTH AND LIQUIDITY
How much is waiting near the price
Depth is how much size sits near the best prices. A deep book, with thousands of shares waiting just a step or two from the price, is a liquid market: you can buy or sell a lot without moving the price much. A thin book, with only a few shares at each level, moves on small orders. Many apps show only the top line, the best bid and best ask, sometimes called level 1. The full ladder is called depth or level 2.
In a thin book with 20 shares at each level, selling 100 shares at once clears five levels and pushes the price down with it. In a deep book, the same 100 barely dents the first level.
Two books, same price
Deep book
5,000 shares waiting within 0.10 of the price, on each side.
A 300-share order fills at the best price or one step away. The price barely moves.
Thin book
50 shares waiting within 0.10 of the price.
The same 300-share order runs through every nearby level and fills far from where it started. The price jumps.
Check yourself
Which book is more liquid?
- One with 5,000 shares waiting within 0.10 of the price
- One with 50 shares waiting within 0.10 of the price
- Both are equally liquid if the last price is the same
- The one whose price moved most today
Show the answer
One with 5,000 shares waiting within 0.10 of the price
Right. Liquidity is about how much is waiting near the price. With 5,000 shares close by, you can trade a fair amount without pushing the price.
A market sell of 300 meets the book
- The order arrives
Someone sends a market order to sell 300 shares: sell now, at the best price buyers are offering.
- It goes to the best bid
The highest buyer is at 99.90, with 300 shares waiting. The order is matched there first.
- The level empties
All 300 fill at 99.90. The buyers at that level are done and their row leaves the book.
- The best bid moves
The highest remaining buy order is now 99.80, so that is the new best bid. The asks are unchanged.
Check yourself
A market order to sell 300 shares hits the example book. What is the best bid afterwards?
- 99.90
- 99.80
- 99.70
- 100.10
Show the answer
99.80
Right. The 300 shares at 99.90 absorb the whole order, that level empties, and the next buyer down, 99.80, becomes the best bid.
Check yourself
- A buy order for 10,000 shares appears at 99.00, far bigger than anything else in the book. Price drifts down to 99.05 and bounces back up.
- The next day the same 10,000-share order appears at 99.00. Price drifts down to 99.05, the order vanishes a second before being reached, and price falls straight through 99.00 to 98.60.
What does the second day show about big orders in the book?
- The exchange removed the order because it was too large
- Displayed orders can be cancelled at any moment, so a big wall is information, not a promise
- Big orders always fill before the price reaches them
- Price can never pass a level where a large order was shown
Show the answer
Displayed orders can be cancelled at any moment, so a big wall is information, not a promise
Exactly. The book shows what people are willing to do this second, and orders can be cancelled any time. A huge wall can make a level look like a floor and then disappear.
Step through it
An empty ladder of prices An order book is a ladder of prices: 100.30, 100.20 and 100.10 above the dashed line, 99.90, 99.80 and 99.70 below it. No orders are shown yet. Waiting buy orders will go on the left, waiting sell orders on the right.
Buyers wait at 99.90, 99.80 and 99.70 Blue bars grow to the left under the header BID: 300 shares wait at 99.90, 500 at 99.80 and 200 at 99.70. Each bar's length is the size waiting. The highest of these prices, 99.90, is the best bid.
Sellers wait at 100.10 and up Orange bars grow to the right under ASK: 200 shares at 100.10, 400 at 100.20 and 300 at 100.30. The best ask, 100.10, and the best bid, 99.90, are now outlined in lilac. The two sides never overlap.
SELL 300 empties the 99.90 level An orange arrow labelled SELL 300 hits the 99.90 row. All 300 shares waiting there are taken, so its bar disappears and the price fades. The lilac outline moves down to 99.80, the new best bid, while the best ask stays at 100.10.
Check yourself
After the SELL 300 in the last frame, some of the buyers waiting at 99.80 were filled too.
Show the answer
False
False. There were exactly 300 shares waiting at 99.90, enough for the whole order, so the 500 at 99.80 are untouched. They simply moved up to become the best bid. A sell of 400 would have reached them.
Lesson recap
- An order book lists every waiting order: bids (buyers) with the highest on top, asks (sellers) with the lowest on top.
- The best bid is the most anyone will pay now; the best ask is the least anyone will sell for. They never overlap.
- At the same price, orders fill in the order they arrived: price-time priority.
- Depth is how much waits near the price. A deep book is liquid; a thin one jumps on small orders.
- A market order eats the book level by level: a sell of 300 cleared 99.90 and made 99.80 the best bid.
- Displayed orders can be cancelled any second, so a big wall is not a promise. Education, not financial advice.