Definition
An order book is a structured record of all current buy and sell orders for a specific trading pair on a centralized exchange (CEX). It displays the prices at which traders are willing to buy and sell, along with the quantities they want to trade. The highest buy prices and lowest sell prices are especially important, as they indicate where trades are most likely to occur next. The order book updates continuously as new orders are placed, changed, or removed.
In crypto trading, the order book is a core concept that shows the visible supply and demand for a token at different price levels. It includes both market orders and limit orders, though only limit orders typically sit in the book waiting to be matched. The structure of the order book helps determine how easily trades can be executed without causing large price moves, which relates closely to slippage and perceived market depth.
Context and Usage
Order books are central to how CEX platforms organize trading activity and match buyers with sellers. The concentration of orders at certain price levels gives a snapshot of liquidity, showing where larger trades might be absorbed more easily. When liquidity is thin in the order book, even modest trades can lead to noticeable slippage between the expected and executed price.
In contrast to a liquidity pool model, where trades are routed against pooled assets using a formula, an order book explicitly lists individual orders from participants. This makes the order book a key reference for understanding current market interest, typical trade sizes, and how prices might react to incoming orders. For beginners, recognizing that the order book is simply a live list of pending buy and sell intentions helps demystify how crypto assets are traded on exchanges.