The order book is a record of all the buy and sell orders for a particular financial instrument, such as stocks, bonds, commodities, or cryptocurrencies, on a trading platform or exchange. The order book provides transparency and serves as a central repository of information for market participants. It is updated in real time which gives an indicator of the amount of trades at any given moment.

On ADVFN the order book is called Level 2 and is available to subscribers. Phone +44 (0) 203 8794 460 for a FREE trial.

When an investor wants to buy or sell a financial instrument, they submit an order to the exchange. These orders are recorded in the order book, which displays the following information for each order:

1. Price: The price at which the buyer is willing to buy or the seller is willing to sell the instrument.
2. Quantity: The number of units or shares the buyer wants to buy or the seller wants to sell.
3. Order type: The type of order, such as market order or limit order. A market order is executed immediately at the best available price, while a limit order specifies a price at which the investor is willing to buy or sell.

The order book is typically divided into two sides: the “bid” side and the “ask” side. The bid side lists all the buy orders, while the ask side lists all the sell orders. The highest bid and the lowest ask prices are often referred to as the “best bid” and “best ask” respectively. The difference between the best bid and best ask prices is known as the “spread” and represents the cost of executing a trade.

Order books can also identify the buyers and sellers behind each individual exchange, although some choose to remain anonymous.

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Traders and investors use the order book to assess market depth and liquidity. It allows them to see the demand and supply levels for a particular instrument and gauge the market sentiment. By analyzing the order book, traders can make informed decisions about when and at what price to buy or sell a financial instrument.