What is an Order book and Market Depth?

An order book is a digital list that organizes and displays buy and sell orders for a specific asset based on price levels. The interests of both buyers and sellers are represented through the order book. It provides a real-time list of outstanding orders for a specific asset, reflecting the dynamic interaction between buyers and sellers.

The order book lists the number of orders at each price point, also known as "depth." This allows for the capture of crucial trading information, effectively enhancing market transparency. Depth and liquidity of the order book play an important role in price discovery.

How Does an Order Book Work?

Almost all trading platforms use order books to list orders for various assets, such as equities, bonds, currencies, and even cryptocurrencies like Bitcoin. The buy and sell information may be displayed at the top and bottom or on the left and right sides of the screen.