What is an order book
An order book is a live list of the buy and sell orders waiting to be filled for an instrument, sorted by price.
The buy side holds bids, the prices buyers are willing to pay. The sell side holds asks (offers), the prices sellers will accept. The gap between the highest bid and the lowest ask is the spread. The view of how much volume sits at each price level is called market depth, or Depth of Market (DOM).
Ready to try it on a real or demo account?
Partner link · trading carries a high risk of loss
Formal definition
On an exchange, the order book is the matching engine's record of all resting limit orders (orders to buy or sell at a set price or better), grouped by price level. Within each level, orders are usually filled in time order. This is called price-time priority. A market order (an order to deal now at the best available price) does not rest in the book. It removes liquidity by trading against the resting orders.
The best bid and best ask together are the top of book. Everything behind them is the depth.
Worked example (hypothetical)
Take a made-up share with this book:
| Side | Price | Size waiting |
|---|---|---|
| Ask | Price C (highest) | large |
| Ask | Price B | medium |
| Ask | Price A (best ask) | small |
| Bid | Price Z (best bid) | medium |
| Bid | Price Y (lower) | large |
A trader sends a market buy order larger than the small size at Price A.
- The order first takes all of Price A.
- The rest of the order moves up to Price B and fills there.
- The trader's average price ends up above the best ask they saw on screen.
This is slippage caused by thin depth. The order may also be filled in pieces, which is a partial fill. If the trader had used a limit order at Price A, only the size available at that price, or better, would have filled.
Where you see the term
- Platforms: exchange terminals show the book directly. MetaTrader 5 has a Depth of Market window. For OTC CFDs (contracts for difference traded with the broker rather than on an exchange), that window shows the liquidity the broker quotes, not a public exchange book.
- Reports and news: "thin order book", "bids pulled", "large sell wall", or "the book emptied" during a flash crash.
- Auctions: before an opening or closing auction, exchanges collect orders into a book and publish an indicative price.
Edge cases experienced traders should know
- Hidden and iceberg orders: only part of the size is displayed, so visible depth can understate real liquidity.
- Spoofing: large orders placed with no intent to trade, then cancelled. The visible book can mislead.
- Fragmentation: the same instrument may trade on several venues, and each venue has its own book.
- Halts: during a circuit breaker, the book can still build up orders while matching is paused.
- Dealer markets: in spot forex there is no single central book. Prices come from dealers and liquidity providers. See A-book and B-book.
Depth can disappear in seconds around news. With leveraged CFD or forex positions, slippage on a thin book can turn into a loss quickly. Read risk management before relying on depth data.
Related terms
- Fill and partial fill
- Fill or kill and IOC
- Day order
- Front running
- Fat finger error
- Counterparty
- Trading glossary
Frequent questions
What is the order book in simple words?
It is the list of buy and sell orders waiting at each price, with buyers on one side and sellers on the other.
Is market depth the same as the order book?
They are closely linked. The order book is the full list of orders. Market depth is how much volume that list shows at each price level.
Does forex have an order book?
Spot forex has no single central exchange book. A Depth of Market window on a broker platform shows the liquidity that broker quotes.
Can I trust a large order I see in the book?
Not fully. Orders can be cancelled at any moment, hidden orders are not displayed, and some large orders are placed only to mislead.