What Is an Order Book? Definition & Example

An order book is the real-time ledger of every resting buy and sell order in a market, sorted by price. Bids (buy orders) sit on one side, asks (sell orders) on the other, and the gap between the highest bid and lowest ask is the spread.

Each price level shows how much size is waiting there. That quantity is the market's depth, and it determines what your order will actually cost. A market buy consumes asks from the cheapest upward until filled — so if your size exceeds what is resting nearby, the later portion fills at progressively worse prices. This is exactly where slippage comes from.

Traders read the book for more than execution cost. Unusually large resting orders — often called walls — can indicate where significant participants are willing to transact, and a thinning book on one side suggests price may move that way with little resistance.

Treat those signals cautiously. Order book data is genuinely useful for judging execution cost and immediate liquidity. It is much less reliable as a directional signal, because resting orders can be cancelled instantly and frequently are. Spoofing — placing large orders with no intention of filling them, purely to influence other traders — is illegal on regulated venues and not uncommon on unregulated ones.

The reliable use is the boring one: before sending size into an unfamiliar market, look at how much depth exists within a few ticks of the current price. If your order is a large fraction of it, split the order or use limits. You can inspect live depth for any Hyperliquid market on its market page.