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Order book

Key Takeaways

  1. An order book of security, in trading, is the list that contains all its buy (bid) and sell (ask) orders in a sequence.
  2. Order book helps to track pending, traded, canceled, and rejected orders, and additionally, investors can check various other information related to the order.

An order book of security, in trading, is the list which contains all its buy (bid) and sells (ask) orders in a sequence — from highest to lowest, for the former and lowest to highest for the latter.

So, the highest bidder will head the buy list, and the lowest seller will top the sell list.

Know more

Order books are mostly maintained in their electronic form these days.

About Order Book

An order book of security, in trading, is the list which contains all its buy (bid) and sells (ask) orders in a sequence — from highest to lowest, for the former and lowest to highest for the latter.

So, the highest bidder will head the buy list, and the lowest seller will top the sell list. Order books are mostly maintained in their electronic form these days.

Order book vs. trade book

An order book contains the orders that are not yet executed, but once the orders in the order books are executed in the exchange market, then the transaction numbers along with the details of the order are logged in the trade book. Order book example. In a trade book, only the order that is executed or the extent to which order is executed is written (in case there is a limit to the number of transactions). Still, in order books, only unexecuted transactions are logged. Brokerage charges are charged using the order book, whereas the other expenses related to the transaction are charged according to the trade book.

Order book meaning

Order book helps to track pending, traded, canceled, and rejected orders, and additionally, investors can check various other information related to the order. Order book helps investors or traders to make informative decisions by checking market prices at any given time. Order books may not help for long term strategy, but it does help short term traders to identify market trends and balances of buyers and sellers with so much transparency. The order book gives a clear indication of the market situation, whether the market is growing or not. If the order book shows significant sell orders than buy orders, it would be considered as the market is in bear market condition.

Terms associated with the order book

  1. Market order: it is an order that is placed to buy or sell any instrument at the current going price in the market. For example, a share has a price of Rs.300; and if you place an order at this point (when the market is open for trade) to buy it, then the trade will be executed, and you will be allotted a unit at Rs.300.
  2. Limit order: AS the name suggests we put a limit to the price at which you buy or sell the instrument. I.e., you place an order that you will buy a share for not more than Rs.290 a unit, and if the stock is available at that price, then you will be allotted. If the price is more, then you won’t be allocated the share.
  3. Stop-loss order: if the price drops below a point then your trader or online platform automatically sells the instrument to stop further loss.
  4. Trailing stop order: A trailing stop order is a stop-loss order placed at a specific amount or percentage above or below the most recent high/low.