Module 1: Spot trading · Lesson 3 of 14
Reading an order book
3 min read
An order book is the live list of all open buy and sell orders for a trading pair, sorted by price. Reading it tells you what price you are likely to get and how easily the market can absorb your order.
Bids and asks
The book has two sides:
- Bids are buy orders. They show the highest prices buyers are currently willing to pay.
- Asks (also called offers) are sell orders. They show the lowest prices sellers will accept.
The best bid is the highest buy price, and the best ask is the lowest sell price. Each price level shows the total quantity waiting there.
The spread
The spread is the gap between the best ask and the best bid. A narrow spread usually signals an active, liquid market. A wide spread means you lose more simply by buying and then selling straight away.
| Side | Price (USDT) | Size (BTC) |
|---|---|---|
| Ask | 60,020 | 0.8 |
| Ask | 60,010 | 0.5 |
| Bid | 60,000 | 0.6 |
| Bid | 59,990 | 1.2 |
Example: in this illustrative book, the best ask is 60,010 and the best bid is 60,000, so the spread is 10 USDT. That is 10 ÷ 60,000, roughly 0.017% of the price.
Depth and slippage
Depth describes how much quantity sits at each price level. If you buy more than the best ask offers, your order "walks the book", filling at progressively worse prices. The difference between the price you expected and your average fill is called slippage.
Example: using the table above, a market order to buy 1 BTC takes 0.5 BTC at 60,010 and the remaining 0.5 BTC at 60,020. The average price is 60,015, which is 5 USDT worse per BTC than the best ask.
Thin books, common on smaller coins, can cause large slippage on even modest orders. Many exchanges show depth as a chart, with bids and asks drawn as two slopes. Steep, tall slopes near the middle indicate plenty of liquidity close to the current price.
Key takeaways
- Bids are buy orders and asks are sell orders; the best of each sit closest to the middle.
- The spread is the best ask minus the best bid, and narrower usually means more liquid.
- Large orders can walk the book, causing slippage.
- Check depth before trading smaller or less popular coins.
Create a free account to save your progress, take the module quiz and earn a certificate.
Sign up freeEducational content only — not investment advice. Leveraged trading carries a high risk of loss.