What Is an Order Book
An order book is the current in-memory state of active buy and sell interest for a market.
It is not a price chart. It is not trade history. It is the **resting liquidity** that incoming orders can interact with.
Two sides
Every order book has two sides:
- **bids**: buyers willing to pay up to some price
- **asks**: sellers willing to sell down to some price
The best bid is the highest buy price. The best ask is the lowest sell price.
What the book tells you
The book answers questions like:
- where is the best available liquidity?
- how much size is near the current market?
- how wide is the spread?
- how deep would I have to trade before price moves?
Resting state vs event history
This distinction matters:
The order book is **state**. Recent trades are **events**.
If an order arrives and executes immediately, it may show up in recent trades but never meaningfully rest in the visible book.
Why quants care
For market microstructure work, the book is one of the main objects of study.
It helps explain:
- queue position
- liquidity concentration
- spread behavior
- price impact
- whether a market feels thin or thick
Mental model
Think of the order book as the market's current posture.
- the tape shows its recent footsteps
- the chart shows broader price context
- the book shows the immediate executable structure