Order Book
An order book is the live list of all open buy orders (bids) and sell orders (asks) for a trading pair on an exchange, sorted by price. It shows where buyers and sellers are currently willing to trade.
How an order book is built
Every limit order that is not filled right away lands in the order book. Buy orders form the bid side, sorted from the highest price down. Sell orders form the ask side, sorted from the lowest price up. Each line shows a price and the total quantity waiting at that price.
The exchange's matching engine pairs orders automatically. When a new buy order is at or above the lowest ask, a trade happens. The book changes many times per second as orders are placed, filled and cancelled.
Reading the book: spread and depth
The gap between the highest bid and the lowest ask is the bid-ask spread. A narrow spread usually means an actively traded market. Market depth describes how much volume sits at each price level. A deep book can absorb large orders without the price moving much; a thin book cannot.
An example
Say the best bid is 99.9 for 5 coins and the best ask is 100.1 for 3 coins, with more asks at 100.3 and 100.8. If you send a market order to buy 10 coins, you first take the 3 coins at 100.1, then move up the ask side until 10 coins are filled. Your average price ends up higher than 100.1. That difference is slippage.
Limits of what the book shows
The book only shows orders on one venue, and orders can be cancelled at any moment. Some large traders hide size, and spoofing, placing big orders with no intention of letting them fill, is a known form of manipulation. Treat the book as a snapshot, not a promise.
Not every exchange uses an order book. Many decentralized exchanges use automated market makers, where prices come from a liquidity pool formula instead of matched orders.
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Frequently asked questions
What do the green and red sides of an order book mean?
On most platforms green shows bids (buy orders) and red shows asks (sell orders). The colours are a convention and can differ between exchanges.
Does a big wall of orders mean the price will stop there?
Not necessarily. Large orders can be cancelled or filled quickly, and some are placed only to create an impression. A wall is information, not a guarantee.
Do decentralized exchanges have order books?
Some do, but many use automated market makers, where you trade against a pool and the price is set by a formula rather than by matching individual orders.
Related terms
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