The order book is a real-time list of all outstanding buy and sell limit orders for a specific asset. It shows how much liquidity exists at each price level and helps traders understand supply and demand in the market.

Order books are fundamental tools for short-term traders and scalpers.

What Is an Order Book?

An order book organizes limit orders into two sides:

Bids: Buy orders placed by traders willing to purchase at a specific price.

Asks: Sell orders placed by traders willing to sell at a specific price.

These orders are stacked at different price levels.

Example:

This structure shows where buyers and sellers are positioned.

Why the Order Book Matters

It reveals liquidity: Traders can see where large orders are located.

It identifies support and resistance: Large clusters of orders may slow or stop price movement.

It helps anticipate volatility: Thin order books often lead to sharp price swings.

Order Book vs Executed Trades

The order book shows pending orders that have not yet executed.

Executed trades appear in the trade tape and represent actual transactions.

Both tools together help traders understand market activity.

Order Books in Scalping

Scalpers closely monitor order books to identify potential entry and exit points.

Large order clusters can signal areas where price might react.

Trading platforms like Skalpy provide real-time order book visualization, helping traders analyze liquidity and market depth before placing trades.