How to read an order book: bids, asks, and market depth

An order book shows the buy and sell orders waiting to trade in a market. To read it, find the highest bid and lowest ask, check the quantity available at each price, then compare that quantity with the size of your intended trade.

The useful question is not simply “What is the price?” It is “How much can trade near that price?” A quote for a small amount does not describe the execution available for a much larger order.

Start with bids, asks, and the spread

A bid is an offer to buy. An ask is an offer to sell. The best bid is the highest resting buy price; the best ask is the lowest resting sell price. Together they form the top of the book.

The spread is the best ask minus the best bid. If the best bid is $99.90 and the best ask is $100.10, the spread is $0.20. Their midpoint is $100.00. That midpoint is a reference, not an offer to transact at $100.00.

A buyer who wants to execute immediately trades against asks. An immediate seller trades against bids. A last-traded price records an earlier execution and may differ from either side of the current book.

Check what the size column measures. It might show asset units, contracts, or quote value. A cumulative column adds the available quantity from the best price through the selected level; it is different from the quantity at that level alone.

Read a simple order-book snapshot

This hypothetical book shows quantities in asset units, before fees. Each row pairs the next bid and ask level for comparison; the prices do not match each other.

At the best ask, four units are available. Across the first two ask levels, ten units are available. Across all three displayed ask levels, twenty units are available. Those are three different answers to “How much liquidity is there?”

Suppose an incoming buy for eight units can consume the first two levels, and nothing changes before it executes. Four units fill at $100.10 and four at $100.20. The total is $801.20 and the average fill price is $100.15: $801.20 divided by eight.

The displayed best ask was $100.10, but it did not have enough quantity for the whole order. The remaining two units at $100.20 are still available in this simplified snapshot after the fill.

For a perpetual position, that $801.20 represents entry notional, not necessarily the collateral needed to open it. See spot vs perpetual futures for the difference between buying an asset and taking price exposure.

Market depth depends on distance from the price

Depth describes the quantity available across price levels. A depth chart commonly plots price against cumulative buy or sell quantity. A steep step indicates a concentration of displayed orders at a particular price.

Depth close to the current market matters more for immediate execution than a large amount far away. A book can have a narrow spread but very little quantity at its best prices. It can also show substantial total quantity while leaving large gaps between levels.

When comparing two books, use the same market, time, units, and price range. Ten thousand dollars of orders within 0.1% of the midpoint is a different measure from ten thousand dollars within 10%.

A large order is not a price prediction

Displayed orders can be filled, amended, or canceled. A large buy “wall” is not a promise that the price cannot fall, and a large sell wall is not a ceiling that must hold.

The book is also different from trade history. It shows orders still available; trade history shows transactions that actually occurred. Neither view reveals every participant's intentions or all liquidity elsewhere.

Treat the snapshot as information about possible execution, subject to change. Counting more bids than asks does not establish what the next trade or next day's price will be.

Price and queue position both matter

In N1's central limit order book markets, better prices execute first. At the same price, earlier resting orders execute first. If you place a buy at $99.90 in the example, other orders at that price may already be ahead of you.

An incoming buy limit at $100.20 could instead execute against the asks immediately. “Limit” does not necessarily mean joining the resting queue. The market vs limit orders guide explains price bounds, partial fills, and maker versus taker roles.

N1 also has markets that use request for quote, or RFQ. Those execute against market-maker quotes rather than a shared resting book. Check the market's execution mode before applying an order-book example to it.

Before using the book to size an order

Identify the side you would consume, confirm the size units, and add the quantity available within the price range you would accept. Compare that with your full intended quantity, then account for fees separately. Review actual fills afterward because a snapshot cannot reserve liquidity for you.

For N1's matching rules, see Order Book and Matching. To connect execution prices with fees and holding costs, read the all-in cost of a trade.