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Order book definition

Order book meaning

Order book is a list containing all relevant information for a security or a financial instrument. It includes all trading transactions, the bid and ask (or offer) prices, buy orders, sell orders and overview of past orders.

Order books can be found at most of the exchanges, and they are available for different assets. The information available on the order book is used for analysing the attractiveness of an asset. Through the analysis, traders decide whether to open a position with a specific asset and which type of position they would open. Namely, they could determine whether to buy or sell an asset.

Order books are mostly used by day-to-day or intraday traders and investors for understanding the characteristics of the underlying assets. They could also be useful for investors who have expressed an interest in buying stock from an Initial Public Offering (IPO).

Order book sections

The data available on the order book can be grouped in sections, such as:

Buy order section is the part where the bid price (the price at which buyers are willing to purchase an asset) is stated. In addition, this section also provides an overview of the bid size, ie the bid volume. This indicates the quantity demanded by buyers.

Sell order section is the section in which sellers are placing their ask price (also called an offer price). This is the minimum sale price acceptable by the sellers of the underlying asset. Along with the asking price, the order book is providing information about the volume available for sale at a different asking price.

Last price and last volume – are sections where the last trading prices and the volume of the last trade are presented.

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