Explanation
The order book shows where counterparties are willing to trade. The thickness right around the current price determines how much you can trade before the price moves.
How an order book is built
On one side sit the bids, on the other the asks, each with a quantity. The highest bid and lowest ask together form the spread. When a buyer is willing to pay the ask, the orders match and a trade occurs — that price is what you see as 'the price'.
What you can read from it
An order book shows where resistance sits: large walls of sell orders at round numbers, or a thin zone where price can shoot through quickly. Be careful interpreting it — walls are regularly placed to mislead others and vanish as price approaches. Only executed trades never lie.
Key takeaways
- Bids below, asks above, spread in between.
- Large walls are often fake (spoofing).
- A limit order = you place your own level in the book.
Frequently asked questions
+What is the difference between maker and taker?
A maker places an order that rests in the book and thus supplies liquidity; a taker removes an existing order. Makers pay lower fees at most exchanges.