Order Book

The live list of all resting buy and sell orders at each price level.

Also called: depth of market · dom · level 2

In plain language

The order book shows unfilled limit orders stacked by price: bids below the current market, asks above it. The top of each side is the best bid and best ask.

Depth is the quantity waiting at each level. A book with thousands of shares at every price absorbs large orders quietly; a book with a handful of shares gaps.

The book is a snapshot of intent, not a promise. Resting orders can be pulled in an instant, and often are, exactly when a large order starts pushing into them.

Worked through

Checking whether a 3,000-share order is small or large here

Shares at the best bid: 4,200
Shares within 5 cents: 11,800
Your order: 3,000
Verdict: a rounding error

Three thousand shares is not big or small in the abstract. It is small here, because the first level alone can absorb it, and it would be enormous in a book showing 200 shares at the bid and nothing within a dollar.

That is the only question the book is being asked: relative to the resting size, is my order noise or is it the event? The answer decides whether the fill will be at the price on the screen or somewhere the calculation never considered.

Two cautions about reading it. Displayed size is not all the size — iceberg and hidden orders mean real depth can exceed what is shown — and displayed orders can be cancelled in microseconds, so a book that looks solid can evaporate as your order arrives.

Used honestly it is still the best available check on the one assumption every position size calculation makes: that you can actually transact at the price you planned around.

Seen on a chart

Asks rest above the market, bids below. The best of each pair is the top of the book, and the gap between them is the spread.

Why it matters

Reading the book tells you what your fill will realistically look like. Position size math assumes you can transact at your entry — the book is where you check that assumption.