# The Order Book and Market Depth > The order book lists every waiting buy and sell order by price. Learn to read market depth, what imbalances show, spoofing risks and how depth affects fills. Source: https://learn.tradelabsai.com/market-structure/the-order-book-and-market-depth/ Track: Market Structure · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "The Order Book and Market Depth", https://learn.tradelabsai.com/market-structure/the-order-book-and-market-depth/ The order book is the live list of all limit orders waiting to be filled for an asset, organised by price. Bids (orders to buy) sit on one side, asks (orders to sell) on the other. The best bid and best ask form the quote you normally see. **Market depth** refers to how much size is waiting at the prices beyond that, and the screen that shows it is often called Level 2 or depth of market (DOM). ## Reading an order book | Bid size | Bid price | Ask price | Ask size | |---|---|---|---| | 1,200 | $40.00 | $40.02 | 800 | | 2,500 | $39.99 | $40.03 | 1,500 | | 4,000 | $39.98 | $40.04 | 900 | | 1,800 | $39.97 | $40.05 | 6,000 | | 3,100 | $39.96 | $40.06 | 2,200 | - The **best bid** is $40.00 for 1,200 shares; the **best ask** is $40.02 for 800 shares. - The **spread** is $0.02. See [Bid-Ask Spread](https://learn.tradelabsai.com/markets/bid-ask-spread/). - **Depth** within five cents: 12,600 shares bid and 11,400 offered. ## What depth tells you ### How much your order will move the price A market buy for 3,000 shares would take 800 at $40.02, 1,500 at $40.03 and 700 at $40.04, for an average of about $40.03. The deeper the book, the less your order moves the price. See [Market Impact](https://learn.tradelabsai.com/orders/market-impact/) and [Slippage](https://learn.tradelabsai.com/markets/slippage/). ### Where liquidity is concentrated Large orders at a price, like the 6,000 shares offered at $40.05, can act as short term resistance, because buyers must absorb them before the price can rise further. Traders call these walls. ### Imbalances If far more size is bid than offered near the market, some traders read it as buying pressure. Imbalances can be informative in the very short term, but they are easy to misread. **Watch out: Visible orders can disappear** Orders in the book can be cancelled in milliseconds. Large orders sometimes appear to influence other traders and vanish before they could be filled. Placing orders you intend to cancel to mislead others is called spoofing and is illegal in regulated markets, but it still occurs, and many large displayed orders are legitimately cancelled when conditions change. Treat depth as a snapshot, not a promise. See [Spoofing and Layering](https://learn.tradelabsai.com/industry/spoofing-and-layering/). ## Hidden liquidity The visible book is not the whole market. Iceberg orders show only part of their size, hidden orders show none, and dark pools and other venues hold liquidity that does not appear on a single exchange's book. In US stocks, each exchange has its own book; consolidated Level 2 views combine them. See [Hidden and Iceberg Orders](https://learn.tradelabsai.com/orders/hidden-and-iceberg-orders/) and [Dark Pools](https://learn.tradelabsai.com/market-structure/dark-pools/). ## Order book in different markets - **Stocks:** depth per exchange, consolidated by many platforms. - **Futures:** each contract trades on one exchange, so the DOM shows the whole visible market; futures traders often trade directly from a price ladder. - **Crypto:** each exchange has its own book; depth varies hugely between exchanges and tokens. - **Prediction markets:** each outcome has its own book of Yes and No orders priced in cents, and depth is often thin away from the best price. ## Who uses order book data - **Scalpers and day traders** who time entries around short term supply and demand. - **Market makers** who manage quotes. See [Market Makers and Liquidity Providers](https://learn.tradelabsai.com/market-structure/market-makers/). - **Execution traders** who judge how much they can trade without moving the price. - **Swing traders** rarely need it; for daily chart strategies it adds little. See [Market Data Levels: Level 1, 2 and 3](https://learn.tradelabsai.com/programming/level-2-data/) for the data feeds behind these views and their costs. ## Frequently asked questions ### What is market depth? The amount of buy and sell orders waiting at prices beyond the best bid and ask, showing how much can trade before the price moves. ### What is Level 2 data? A view of the order book showing multiple price levels and sizes, not just the best bid and ask. ### Can the order book predict price direction? It can hint at very short term pressure, but orders change constantly and can be cancelled, so it is an unreliable predictor on its own. ## Sources - Wikipedia, [Order book](https://en.wikipedia.org/wiki/Order_book) ## Continue learning - Next lesson: [Price Discovery](https://learn.tradelabsai.com/market-structure/price-discovery/) - Previous lesson: [Market Makers and Liquidity Providers](https://learn.tradelabsai.com/market-structure/market-makers/) - Related: [Market Makers and Liquidity Providers](https://learn.tradelabsai.com/market-structure/market-makers/): Market makers quote prices to buy and sell all day, earning the spread. Learn how they make money, manage risk, why they matter and the myths about them. - Related: [Bid-Ask Spread](https://learn.tradelabsai.com/markets/bid-ask-spread/): The bid-ask spread is the gap between the best price to buy and the best price to sell. Learn how to read it, what it costs you and how to pay less of it. - Related: [Market Data Levels: Level 1, 2 and 3](https://learn.tradelabsai.com/programming/level-2-data/): Level 2 data shows bids and offers at multiple prices beyond the best quote. Learn level 1, 2 and 3 data, how to read depth, its limits and how traders use it. - Related: [Liquidity](https://learn.tradelabsai.com/markets/liquidity/): Liquidity is how easily you can trade without moving the price. Learn the signs of a liquid market, how illiquidity costs you and when liquidity disappears. - Related: [Fill Probability and Queue Position](https://learn.tradelabsai.com/orders/queue-position/): Your place in the order queue decides whether a limit order fills. Learn how queues work, how to estimate fill probability and why fills can be a warning sign. - Related: [Market Impact](https://learn.tradelabsai.com/orders/market-impact/): Market impact is the price movement caused by your own trading. Learn temporary and permanent impact, the square root rule of thumb and how large traders reduce it. - Related: [Spoofing and Layering](https://learn.tradelabsai.com/industry/spoofing-and-layering/): Spoofing and layering use orders placed with no intent to execute to trick other traders. Learn how they work, how they are detected, key cases and the law.