Order Book

An order book is a real-time record of every open order on a trading pair. Buy orders, called bids, are listed from highest price down. Sell orders, called asks, are listed from lowest price up. The gap between the best bid and the best ask is the spread, and the quantity available at each price level is the depth.

When a trader places a market buy, the exchange fills it against the lowest asks until the full amount is bought. If someone wants to buy 10 BTC and the best ask has only 3 BTC at 60,000 dollars, the next 7 BTC come from higher-priced asks, so the average fill price rises. That price impact is called slippage, and it grows as orders get larger relative to the book.

Centralized exchanges and some decentralized exchanges use order books. Most DEXs instead use automated market makers, which replace the list of orders with a pool and a pricing formula. Reading an order book is a basic skill for active traders, since large walls of orders can signal where other participants expect prices to stall.