What is an order book on an exchange?

Definition and Core Functionality

1. An order book is a real-time electronic ledger that displays all open buy and sell orders for a specific cryptocurrency trading pair on a digital asset exchange.

2. It organizes orders by price level, grouping identical or adjacent prices into aggregated depth entries known as market depth.

3. Each entry includes the total quantity of tokens available at that price and the number of individual limit orders contributing to that level.

4. The highest bid—the topmost buy order—and the lowest ask—the bottommost sell order—define the current bid-ask spread.

5. Market orders execute instantly against the best available counterparty orders, while limit orders remain in the book until matched or canceled.

Data Structure and Display Logic

1. Exchanges typically render the order book with bids on the left (descending price order) and asks on the right (ascending price order).

2. Price levels are not always contiguous; gaps appear where no orders exist, reflecting liquidity fragmentation across price ranges.

3. Some platforms display raw order data showing individual user orders, while most aggregate them to prevent front-running and enhance readability.

4. Timestamps, order IDs, and trader anonymity settings vary by exchange policy but rarely appear in public-facing views.

5. Real-time updates occur via WebSocket streams, delivering delta changes rather than full book snapshots to minimize bandwidth usage.

Liquidity Representation and Interpretation

1. A deep order book shows substantial volume stacked near the mid-price, indicating strong short-term liquidity and reduced slippage risk.

2. Thin books—especially those with large price gaps between levels—signal vulnerability to volatility-induced liquidations and manipulation.

3. Order book imbalance, calculated as the ratio of bid-side volume to ask-side volume over a defined price range, serves as a proxy for directional sentiment.

4. Whale orders—large limit entries far from the current market price—can act as psychological barriers or magnet points for price movement.

5. Traders analyze cumulative depth charts to assess how much volume would be consumed moving price by a given percentage, aiding in execution strategy design.

Order Book Manipulation Tactics

1. Spoofing involves placing large limit orders with no intent to trade, creating false impressions of supply or demand before canceling them.

2. Layering mimics spoofing but uses multiple smaller orders across several price levels to evade detection algorithms.

3. Wash trading—executing matched buy/sell orders between colluding accounts—artificially inflates volume and distorts perceived liquidity.

4. Quote stuffing floods the book with rapid-fire orders and cancellations to overwhelm matching engines and delay competitors’ execution.

5. Iceberg orders conceal true size by displaying only a fraction of the total volume, though their presence can still be inferred through pattern analysis.

Frequently Asked Questions

Q: Can I see who placed an order in the public order book?No. All major exchanges anonymize order origin. User identifiers, IP addresses, and wallet addresses are never exposed in public book feeds.

Q: Why do some exchanges show different order book depths for the same pair?Divergence arises from differences in aggregation logic, update frequency, API rate limits, and whether hidden or iceberg orders are included in the displayed view.

Q: Does the order book include stop-loss or take-profit orders?No. Stop orders are not part of the live order book until triggered. Once activated, they convert into market or limit orders and then appear accordingly.

Q: How often is the order book updated?Updates occur in sub-millisecond intervals during active trading. Most exchanges push changes via WebSocket connections with latency under 100 milliseconds under normal network conditions.