The order book is an electronic list that a trading venue uses to record buy and sell orders for financial instrument or specific security organized by price level. An order book grades the number of shares being offered at market depth. It also classifies the market contributors behind the buy and sells orders, though some decide on to stay nameless. These lists benefit the market participants because they improve market transparency by providing valued trading material.
Almost every exchange around the world use order book to record the orders for diverse assets such as currencies, bonds, stock and even cryptocurrencies like altcoin, bitcoin. The orders can be both electronic and manual. Though they usually comprise the similar info but the set up may be somewhat dissimilar depending upon the source. The information about buying and selling may seem on the left and right or the top and bottom of the screen.
An order book is lively, which means that it is continually updated in real-time all through the day. There are characteristically three parts of the order book, the buy order, sell order and order history. The buy order record all buyers info including the asking price, the amount they demand to purchase and all the bids. The sell orders resemble the buy orders and order history shows all trades that have taken place in past.
The order book help traders to make the best trading decision by providing accurate market information. They can understand that which dealer, brokerage firm or broker are selling or buying securities and conclude whether market action is being motivated by institutions or retail investors. The order book also displays the order difference that might deliver signs to stock trend in the concise term.
Though order book is considered to deliver clearness to market participants, however, some particulars are not counted in the list, such as dark pools. These are collections of concealed orders upheld by large market players who do not need their trading purposes known to others.
The existence of dark pools usually decreases the usefulness of order books to some degree since there is no means of knowing whether the order recorded on the order books are illustrative of factual supply and demand for the stock.
The order book endures gathering a cumulative amount of info for traders all around the world for free. NASDAQ titles to deliver additional market info than any other book, usually showing more than 20 times the liquidity of its legacy level 2 market depth product. Extra information may be useful to experienced market professionals and day traders who depend on the order book to make trading decisions.