Definition
Order Book
The order book is the real-time list of all outstanding buy and sell orders for a stock, organised by price.
The exchange's order book matches buyers and sellers continuously. Buy orders (bids) are ranked highest-price-first and sell orders (asks) lowest-price-first; a trade occurs when the best bid meets the best ask.
What retail investors see as market depth is a snapshot of this order book (the top 5 bids and asks on the NSE/BSE). The full order book reveals where buying and selling interest is concentrated, hinting at near-term support and resistance.
Related terms
- Market DepthMarket depth shows the quantity of buy and sell orders waiting at each price level, indicating how much volume the market can absorb.
- Bid-Ask SpreadThe bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask), representing a core implicit cost of trading and a measure of liquidity.
- Limit OrderA limit order specifies the maximum price a buyer will pay or the minimum a seller will accept, executing only at that price or better and resting in the order book until it can be filled.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.