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Order Book

An order book is a digital record of buy and sell orders for a particular financial instrument, such as stocks, bonds, or cryptocurrencies, organized by price level.It displays the quantity of each order and the corresponding bid (buy) or ask (sell) price. The order book provides transparency to traders by showing market depth, allowing them to assess supply and demand dynamics and determine the best execution strategy.

Example

A trader examines the order book for a stock to see that there are 500 shares available to buy at $100 and 300 shares available to sell at $102, helping them decide when to enter the market.

Key points

• A digital record of buy and sell orders for a financial instrument, organized by price.

• Displays bid (buy) and ask (sell) prices and the quantities available at each level.

• Provides transparency on market depth and helps traders assess supply and demand.

Quick Answers to Curious Questions

It shows market depth by displaying buy and sell orders at different price levels, helping traders assess supply and demand and choose optimal trade timing.

The bid price is the highest price a buyer is willing to pay, while the ask price is the lowest price a seller is willing to accept.

It allows traders to see market activity and liquidity, helping them make more informed trading decisions based on current demand and supply.