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Analyzing Market
Glossary

Order Book

An order book is a live, organised list of all the outstanding buy and sell orders for an asset on an exchange, arranged by price.

How it works

Buy orders (bids) and sell orders (asks) are stacked by price, with the highest bid and lowest ask meeting in the middle; the gap between them is the spread. When a buy and sell order match on price, a trade executes. The depth of orders at each level shows how much can be traded before the price moves — a measure of liquidity.

Why it matters

The order book is where price discovery happens on centralized exchanges, revealing supply, demand and liquidity at a glance. Many decentralized exchanges replace it with automated liquidity pools, but the order book remains the classic market structure.

Example

A thin order book with few orders means a single large trade can move the price sharply.

Order Book: Frequently Asked Questions

How does an order book work?
Buy orders (bids) and sell orders (asks) are stacked by price, with the highest bid and lowest ask meeting in the middle; the gap between them is the spread. When a buy and sell order match on price, a trade executes. The depth of orders at each level shows how much can be traded before the price moves.
What is the spread in an order book?
The spread is the gap between the highest price buyers are willing to pay (the best bid) and the lowest price sellers will accept (the best ask). A narrow spread usually indicates an active, liquid market, while a wide spread suggests fewer participants. It effectively represents part of the cost of trading at the current moment.
Do decentralized exchanges use order books?
Some do, but many decentralized exchanges replace the order book with automated liquidity pools, where trades are priced against pooled tokens rather than matched between individual orders. The order book remains the classic market structure on centralized exchanges, where it is the main venue for price discovery, revealing supply, demand and liquidity at a glance.
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