How it works
Every limit order sits in the book at its specified price until it fills, is cancelled, or expires. Market orders consume the book starting from the best price and walking down. Most exchanges publish a depth-of-market view showing the top 5 to 20 price levels on each side, along with the volume available at each level. The order book is the most granular real-time picture of supply and demand a venue offers.
Example
BTC/USDT order book on a centralised exchange: 50 BTC bids at $43,000, 80 BTC bids at $42,990, 120 BTC bids at $42,980. On the other side: 30 BTC asks at $43,010, 70 BTC asks at $43,020, 100 BTC asks at $43,030. The current spread is $10. A market buy for 200 BTC would consume all of $43,010, $43,020, and most of $43,030, with average fill around $43,025.
Why it matters
Order book reading lets you estimate slippage before placing a large order, spot accumulation or distribution patterns from clustering, and identify spoof orders that disappear when touched. Algorithmic traders rely on book microstructure for sub-second decisions. Discretionary traders use it less precisely but should still glance at depth before sizing any meaningful position.
