Order book definition

• Updated

The order book is a list of trades, orders and other information about exchange-traded securities

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What is an order book? Read on to find out! – Photo: Shutterstock

Order book meaning

An order book is a list containing all the relevant information regarding a particular 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 exchanges, and they are available for different assets. The information they contain is used to analyse the attractiveness of an asset. Through such analysis, traders decide whether to open a position with a specific asset and which type of position they would open. Or to put it more simply, they can 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 can 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 into sections, such as:

Buy order section: 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: The section in which sellers place 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 provides information about the volume available for sale at different asking prices.

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

Further reading:

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