Reading the Order Book
The order book is essential for understanding market dynamics. Learn to read depth, identify support/resistance, and spot trading opportunities.
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.