An order book is a venue-specific record of buy and sell interest arranged by price; market depth describes the quantity displayed across those price levels. It can show the immediate trading environment, but it does not guarantee that displayed orders will remain available or reveal all liquidity in the wider market.
The visible book has a bid side and an ask side
The highest displayed buy price is commonly called the best bid, while the lowest displayed sell price is the best ask or offer. Their difference is the quoted spread. Additional levels show how much displayed interest is available farther from the best prices.
| Element | What it shows | Limit |
|---|---|---|
| Best bid | Highest displayed buying interest on the feed | Quantity may change before execution |
| Best ask | Lowest displayed selling interest on the feed | May not include other venues |
| Depth | Displayed quantity at additional prices | Hidden orders and internalized flow may be absent |
| Queue | Priority among orders at a price | Exact priority rules depend on the venue |
Queue position affects passive execution
A limit order joining an existing price may wait behind earlier orders or receive priority under other venue rules. Seeing traded volume at that price does not mean every resting order was filled. Cancellations, new orders and hidden quantity change the queue continuously.
Displayed depth is not guaranteed liquidity
Orders can be cancelled or modified, and fast participants may react before a slower order reaches the venue. Conversely, hidden or reserve orders can provide more executable quantity than the display shows. Depth is therefore an observation, not a promise or a complete estimate of market capacity.
Structure differs by market
| Structure | What a participant may see |
|---|---|
| Central limit order book | Orders submitted to that exchange or venue under its rules |
| Dealer market | Prices and sizes quoted by one or more dealers |
| Aggregated feed | Selected liquidity combined from connected sources |
| Internalized flow | Customer interest matched inside a dealer or broker system |
Spot FX has no universal central order book
Most spot foreign exchange trades over the counter across dealers, electronic venues and customer networks. A broker's depth screen can be useful for that broker's connected liquidity, but it is not the complete global FX book. The foreign-exchange framework explains this fragmentation and dealer internalization.
Depth can inform execution without predicting direction
Traders may use the book to choose order type, estimate immediate spread and available size, or monitor short-lived imbalance. A large displayed order can be executed, cancelled, replenished or bypassed. It should not be treated as guaranteed support, resistance or future direction.
A disciplined reading sequence
- Name the venue, feed and instruments included.
- Check whether the data is real-time, delayed or aggregated.
- Identify the best prices, spread and depth by level.
- Understand queue and hidden-order rules.
- Compare intended size with available liquidity.
- Record the actual fill, slippage and market response.
- Review whether the screen helped execution rather than judging it from price direction.
Connect depth to broader market quality
Market liquidity covers spread, depth, immediacy and resilience as a wider concept. Orders and execution explains how market and limit orders interact with available prices, while price discovery covers how information becomes price.
Primary references
- U.S. SEC market structure
- BIS markets and FX structure research
- Use the exact exchange or venue rulebook and data specification for operational decisions.