An order book is the live list of buy and sell orders for a trading pair on an exchange. It shows the prices at which traders are willing to buy and sell, and how much they want at each price. Reading it is a basic skill for anyone who trades with more than simple market orders.
The Two Sides of an Order Book
- Bids: orders to buy. Each row shows a price and the amount wanted at that price. Bids are sorted with the highest price on top.
- Asks: orders to sell, also called offers. Asks are sorted with the lowest price nearest the middle.
- Spread: the gap between the highest bid and the lowest ask. The midpoint between them is the mid price.
Most exchanges show three columns: price, size and a running total. Rows are price levels, not single orders. One row may combine many traders' orders at the same price.
A tight spread usually means an active, liquid market. A wide spread shows up on pairs with few participants and makes every trade more expensive.
How Orders Get Matched
Two order types drive the book. The SEC's investor site describes them under types of orders, and the same logic applies on crypto exchanges.
- Limit order: sets the worst price you will accept. If it cannot fill right away, it rests in the book and waits.
- Market order: fills immediately against the best orders available, at whatever prices they carry.
Exchanges match by price first and then by time. The best price gets filled first, and among orders at the same price, the earliest goes first.
A trader whose order rests in the book is a maker, because the order adds liquidity. A trader who fills against resting orders is a taker. Many exchanges charge makers a lower fee than takers.
A Worked Example
Suppose the ask side of a BTC book looks like this. The numbers are made up.
- 0.5 BTC offered at $60,000
- 0.3 BTC offered at $60,010
- 1.0 BTC offered at $60,050
A market order to buy 1 BTC takes all 0.5 at $60,000, all 0.3 at $60,010 and 0.2 at $60,050. The average price paid is $60,013, not the $60,000 shown as the best ask. That difference is slippage. The larger the order compared with the size resting near the top of the book, the larger the slippage.
A limit order to buy at $60,000 would fill 0.5 BTC and leave the other 0.5 waiting in the book as a new bid.
Reading the Depth Chart
A depth chart draws the book as two curves. Bids are on the left, asks on the right, and the current price sits in the middle. The curves are cumulative: each point shows the total amount available up to that price.
- A curve that climbs quickly near the middle means a lot of size is resting close to the current price.
- A flat stretch means few orders across that price range, so the price can cross it quickly.
- A sudden vertical step is a wall: a large amount at one price level.
A buy wall can slow a fall and a sell wall can cap a rise, at least while they remain in place.
What an Order Book Can Tell You
- Trading cost: the spread and the depth near the top show what a trade of your size will really cost.
- Liquidity: a thin book, with small sizes at each level, means larger orders will move the price.
- Short-term balance: more size on the bid side than the ask side can point to buying interest near the current price, and the reverse can point to selling interest.
What It Cannot Tell You
The book shows intentions, not commitments. Any order can be cancelled before it trades.
- Spoofing: a trader places large orders with no intention of letting them fill, to create a false impression of demand or supply, and then cancels. The practice is illegal in regulated US futures markets and is harder to police on offshore crypto venues.
- Hidden orders: some exchanges allow iceberg orders that show only a small part of their true size.
- Other venues: one exchange's book is only a slice of the market. The same coin trades on many exchanges, on DEX pools and in private deals.
- Speed: on busy pairs the book changes many times per second. Automated traders react faster than any person reading the screen.
For these reasons, the book is best used to plan how to execute a trade, not to predict direction.
Order Books on DEXs
Most decentralized exchanges do not use order books. They use automated market makers, where traders swap against a pool of tokens and a formula sets the price. There are no bids and asks to read. What matters is the pool's size, since a small pool means a large price impact. The Uniswap documentation explains the pool model.
Some decentralized exchanges do use order books, mainly for perpetual futures. dYdX and Hyperliquid each run an order book on a chain built for that purpose. The dYdX documentation describes its design.
Common Mistakes
- Sending a large market order into a thin book. Use a limit order or split the trade.
- Treating a wall as solid support or resistance. It can vanish in a second.
- Reading the top few rows only. Check the depth across the range your order will reach.
Nothing in this article is financial advice.
Track on CoinMarketGuy
The exchanges page lists trading venues, which is where you will find order books for a given pair. For pool-based trading, the DEX page shows active pools with volume and liquidity. Coin pages such as Bitcoin show the live price and chart.