An order book is a real-time list of the buy and sell orders that people have placed for a particular asset on an exchange. Buy orders, called bids, sit on one side, and sell orders, called asks, sit on the other. Together they show how much people are willing to pay and accept at various prices.
The order book is where prices meet. When the highest bid matches the lowest ask, a trade occurs. The gap between the best bid and best ask is called the spread, and a narrow spread usually signals an active, liquid market.
Reading an order book gives a sense of supply and demand at a glance. Large clusters of orders can hint at where many participants are interested. For beginners, the main value is understanding how exchanges match buyers and sellers to arrive at a price.
Frequently Asked Questions
What is the spread in an order book?
The spread is the gap between the highest price buyers offer and the lowest price sellers accept. A narrow spread usually indicates an active, liquid market.
How does an order book set the price?
A trade happens when the highest bid meets the lowest ask. The most recent matched price becomes the current market price shown on the exchange.
