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Trading Guide
Understanding Order Book and Market Depth

Understanding Order Book and Market Depth

2021-07-26 02:59

What is an order book?

An order book is an electronic list of buy and sell orders for a specific asset organized by price level. Buyers’ and sellers' interests are represented via order books. An order book depicts the dynamic connection between buyers and sellers by visualizing a list of outstanding orders for a specific asset in real-time.
The quantity of orders being bid on or offered at each price point, also known as market depth, is listed in an order book. They provide vital trading information, which increases market transparency. Depth and liquidity of the order book play a crucial role in price discovery.

How does an order book work?

Almost every exchange uses order books to list orders for various assets, such as equities, bonds, currencies, and even cryptocurrencies. Buy and sell information may show at the top and bottom of the screen or on the left and right sides.
An order book is constantly updated in real-time throughout the day, which means they are dynamic and reflect the real-time intent of the market participants.
There are typically four parts to an order book: buy orders, sell orders, price, and size.
  • Buy orders contain buyer information, including all bids (the amount they wish to purchase).
  • Sell orders contain seller information, including all offers (the amount they wish to sell).
  • Each price level will show the given quantity of orders (size) that participants are willing to buy or sell the asset.
  • The highest bid and lowest ask prices are found at the top of the book. Binance order books show the cumulative size of liquidity for each side of the market (buy/sell) up to the top of the book.
The order book helps traders make more informed trading decisions. They can see order imbalances that may provide clues to an asset’s direction in the short term.

How to customize the order book display?

You can customize the order book display using the following tools.
1. You can choose how prices display on the order book. For example, choosing [0.01] will display prices in 2 decimal places.
2. Checking the box next to [Display Avg.&Sum] will display a floating table.
You’ll be able to view the asset’s average price and your total base and quote asset holdings.
3. Choose [Amount] or [Cumulative] to view the order book depth by:
  • the amount of buy and sell orders at various price points, or
  • the depth of buy and sell orders.
4. You can also enable the [Quick Switch Buy/Sell] function. The system will switch the trading direction automatically based on the price you select in the buy or sell order book, enabling you to quickly set up the order.
For example, if you click a sell order price in the red area, the system will automatically switch to the buy side, and the price will be automatically filled in.
*Please note that the price you select may be taken by counterparties before you submit the order.
5. To go to the order book, click [More].
You’ll see the cumulative value of both quote and base assets for each price. The bar chart displayed beneath the order book represents the amount of buy and sell orders at various prices.
Click [Depth] to view more prices on the order book.