Order Book in Trading - How to Read the Market Depth

Order book serves as a key element of market analysis, allowing traders to see the real-time picture of supply and demand. This tool displays the price depth chart — a table with current buy and sell orders at various price levels.

What is an order book and how does it work

The order book is a tabular representation of market quotes, formed by the market’s ability to maintain efficient price discovery even during large trading operations. In this table, the actual relationship between participants executing trades at specific price levels is clearly visible.

Color coding makes reading the order book easier: sell orders are shown in red, and buy orders in green. Each row contains information about the number of contracts (QTY) at a certain price, as well as the cumulative total (Total), showing the accumulated volume upward and downward from the current level.

Practical example of reading prices and volumes

Let’s consider a specific example of working with the order book. Suppose the best ask price is $9,881, and the best bid price is $9,880.50. If a trader wants to raise the Bitcoin price to $9,881.50 via a market buy order, they will need to purchase 447,535 contracts entirely at the price of $9,881, which will automatically push the last traded price higher.

This example demonstrates how order volume influences price movement. The spread between the best bid and ask prices indicates liquidity — the smaller the spread, the more liquid the market at the moment.

Two display modes and their applications

On the Gate.io platform, two viewing options are available for convenience depending on your analysis style. You can choose a zoom level of 0.5 or 1, depending on the level of detail you need. For a full view with all options, click the button in the upper right corner of the interface.

How to use this information for decision-making

The main value of the order book lies in several aspects. First, it helps identify the current market momentum based on order volumes. Large buy volumes typically indicate interest in acquiring assets and increase the likelihood of price growth. Conversely, significant sell volumes suggest traders want to offload positions, which can lead to a decline.

Second, the order book helps assess volatility and the range of price fluctuations. If the difference between neighboring price levels is small, it indicates good liquidity and minor fluctuations when an order at a certain price is triggered. A large spread between adjacent orders suggests the possibility of a price jump when executing a large position.

Important limitations and risks in analysis

It is critically important to remember the limitations of using the order book. The data reflects only pending orders waiting to be executed. A trader can cancel their order at any moment before it is filled, so it is impossible to predict market movement with absolute certainty based solely on the order book.

Additionally, experienced market participants sometimes set “traps” — large orders that they cancel after neighboring positions are triggered. This requires traders to exercise caution and use the order book in combination with other technical and fundamental analysis tools.