Order Book
This article details what an order book is.
What is an Order Book?
An order book is an investment tool used primarily in the stock exchange but has recently been an emerging presence in the crypto space. It is used to gauge real-time interest in a 'particular financial instrument'. A matching engine uses this to determine which orders can be fully or partially executed.
Buy and Sell
The two main participants in an order book are the 'buyer' and the 'seller'. The buyer (the 'buy') bids for a certain amount of tokens at a specific price. This demand is then satisfied by the seller (the 'sell'), who asks for a particular fee for their tokens. A list of 'buys' and 'sell(s)' is generated with the matching engine pairing deals that satisfy both parties.
Visual Representation
An order book depth chart dynamically shows the list of bids and asks for a specific commodity. A general rule of practice is that the buys are shown on the left and the sells on the right.
Order Book Terminology
The order book is used as an analytical tool and contains numerous methods to utilise it, so we'd suggest further reading to grasp its concept fully; however, we'll explain the general terminology used for the order depth chart.
Price Point
When multiple orders are the same price, they are referred to as a price point, meaning that if a bid comes at that price level, the sell orders could potentially fulfil it.
Top of the book
The top of the book is the highest buy and the lowest sell.
Book depth
The book depth is the number of price levels available at a particular time.
Last updated
