Reading the Order Book

Order Book Basics

The order book displays all pending buy and sell orders organized by price level:

Bids (Buy Orders)

Displayed in green, these are orders to buy shares. Arranged from highest price (top) to lowest. The top bid is the best price to sell at.

Asks (Sell Orders)

Displayed in red, these are orders to sell shares. Arranged from lowest price (top) to highest. The top ask is the best price to buy at.

Size Column

Shows how many shares are available at each price level. Larger sizes indicate stronger interest at that price.

Reading Market Depth

Market depth shows the cumulative size of orders at and below each price level:

Depth Visualization

The colored bars behind prices show relative depth. Longer bars indicate more liquidity at that price level.

Support Levels

Large buy orders clustered at certain prices act as support — they absorb selling pressure and can prevent price drops.

Resistance Levels

Large sell orders act as resistance — they need to be filled before price can move higher.

Spread Analysis

The spread is the difference between the best bid and best ask:

Tight Spread

A small spread (1-2 cents) indicates high liquidity and efficient markets. Trading costs are lower.

Wide Spread

A large spread suggests low liquidity. You'll pay more to enter and exit positions. Consider using limit orders.

Trading Signals

The orderbook can provide valuable trading signals:

Order Imbalance

Significantly more bids than asks (or vice versa) may indicate directional pressure and potential price movement.

Large Orders

Sudden appearance of large orders can signal institutional interest or informed traders entering the market.

Order Removal

Large orders being pulled from the book may indicate changing sentiment or preparation for a large market order.

Putting the book together with orders

Use the book to choose between market and limit execution. If the spread is tight and your size is small relative to displayed depth, a market order may be reasonable. If the spread is wide or your size spans multiple levels, a limit at or inside the spread often saves edge.

Pair book reading with timeframe: fast markets punish resting orders that are even a few ticks off fair value. Re-quote when the mid moves, and cancel stale limits before resolution noise picks them off.

Finally, cross-check the chart narrative with the book. A bullish chart with heavy offers above the market may be harder to ride than the candles alone suggest, and vice versa for bearish prints with large bids below.