An order book on the Exchange Platform is simply a list of buy and sell orders placed by market makers for a specific trading pair such as BTC/EUR or ETH/USD. Below is an example of the BTC/EUR order book.
As we can see in the image above, the order book is split into two sections:
Bids (buyers) in green
Asks (sellers) in red.
In the middle of these highlighted in yellow, we can see the “mid-price”. This is simply just the price in the middle of the lowest ask and highest bid.
Anyone can be a “market maker” by simply placing a Limit Order. Whilst your limit order is active, this will appear in the order book underlined. In the example below, we have placed a bid (buy) for BTC at 60,115.00 EUR.
As you can see, your active order will appear on the green side as it is bid, and you are saying you want to buy BTC for this specified price. Essentially, your order is placed in a queue until it is filled by another trader, or you if decide to cancel it.
When we are referring to the spread of an order book, this can easily be described as the difference in price between the lowest ask and highest bid. The spread can be displayed as an absolute value which is €0.02, or as a % value which is 0.003% as shown in the example below.
Whilst it is common to see either one of the other, CoinMetro displays both for transparency.
CoinMetro allows users to control how they visualize the order book in multiple ways.
Firstly, you are able to view all the orders in the book cumulatively. This means that instead of seeing multiple levels and the amount at each price level independently, you can see the sum as you look up the book. This can be achieved by selecting the symbol as shown below.
This feature is extremely useful in the case you are placing a market order and the order book is fairly thin/illiquid. You will be able to see exactly how your buy or sell order will impact the price of the asset you are trading, which can help you determine if you wish to wait/place a smaller or larger order, or use another order type such as a limit order.
Cumulative volume essentially works the same as the cumulative order book; but instead of showing the values cumulatively, it only shows the volume bars (the red and green bars in the book). This can be achieved by selecting the symbol shown below.
This feature can be very useful at a glance to see where there are larger orders or 'holes' in the order book.
CoinMetro’s Demo Platform is always available if you would like to practice without risk. Please note that this article is not to be seen as trading or financial advice. It is for educational purposes only.