Order Book trading and reading should be basic for a professional trader in order to understand how market works. It is the first source besides the so called Tape (Time & Sales) and is the direct source of second-level-market generated information – the most objective information that is derived from real positions taken in the markets by real people with real money. 

The Order Book visualizes  the “double auction” mechanism that allows buyers and sellers submit bids and asks simultaneously. Most financial markets use double auction mechanism. 

It is not my intention to reinvent the wheel! There are hundreds of videos and presentations about Order Book, its understanding and usage in the web.

My intention is to point you to some interesting aspects of an order book like

It is my duty as professional trader to see and understand where areas of interest are and whether and why I should pull the trigger to participate in the market. Therefore, understanding auctions and seeing them live is paramount for my job. 

Limit Order Book Terms

Limit Order

limit order sits in the order book until it is:

Market Orders

market order is an order to buy/sell a certain quantity of the asset at the best available price in the book.

Cancellations

Limit Order Book Dynamics Summary

 

I would like to warmly recommend the courses on the introduction to the order book of Prof. Richard Holowczak (Baruch College NY). Because they are so good and understandable I want to link the courses on my site.

 Let’s start with the first of this series the “Limit Order Book”

‚Äč

After this clear and practical first lesson my recommendation is to have a look at the next video which explains “Limit Orders and Market Orders

In further blog articles I will describe how to combine this necessary basic knowledge with trading related decisions. Order Book Trading

In our courses I am teaching the auction and order book reading. See curriculum for the presence as well for the Online course.

Leave a comment if you have any further suggestions. 

See also: 

Contrary Trading with Bookmap – Basics and Execution