Glossary

Order Book

Plain-language definition Crypto glossary

Key takeaways

An order book is a live, organised list of all outstanding buy and sell orders for an asset on an exchange, arranged by price.
Bids and asks are stacked by price with the gap between the highest bid and lowest ask forming the spread, and a trade executes when a buy and sell order match.
The depth of orders at each price level reveals liquidity, so a thin order book means a single large trade can move the price sharply.

Definition

An order book is a live, organised list of all the outstanding buy and sell orders for an asset on an exchange, arranged by price.

How it works

Buy orders (bids) and sell orders (asks) are stacked by price, with the highest bid and lowest ask meeting in the middle; the gap between them is the spread. When a buy and sell order match on price, a trade executes. The depth of orders at each level shows how much can be traded before the price moves — a measure of liquidity.

Why it matters

The order book is where price discovery happens on centralized exchanges, revealing supply, demand and liquidity at a glance. Many decentralized exchanges replace it with automated liquidity pools, but the order book remains the classic market structure.

Example

A thin order book with few orders means a single large trade can move the price sharply.

FAQ

Frequently asked questions

What is the difference between a bid and an ask?

A bid is a buy order showing the price someone is willing to pay, while an ask is a sell order showing the price someone is willing to accept. The gap between the highest bid and the lowest ask is called the spread.

How does an order book show liquidity?

The depth of orders stacked at each price level indicates how much can be traded before the price moves. A deep book with many orders can absorb large trades, while a thin book means even a modest order can shift the price sharply.

Do decentralized exchanges use order books?

Many do not. A large share of decentralized exchanges replace the order book with automated liquidity pools, though the order book remains the classic market structure used on centralized exchanges for price discovery.