Order book




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Order bookOrder Book

DEFINITION of 'Order Book '

Order Book Official

Support (Support Level)

BREAKING DOWN 'Order Book '

At market open on the Nasdaq, the opening book and continuous book are consolidated to create a single opening price. A similar process is followed at market close, when the closing book and continuous book are consolidated to generate a single closing price .

The order book information helps traders make better-informed trading decisions, since they can see which brokerages are buying or selling the stock and whether market action is being driven by retail investors or institutions. The order book also shows order imbalances. which may provide clues to the stocks direction in the very short term. A massive imbalance of buy orders compared to sell orders, for instance, may indicate a move higher in the stock due to buying pressure.

The order book is also useful in pinpointing a stocks potential support and resistance levels. A cluster of large buy orders at a specific price may indicate a level of support, while an abundance of sell orders at or near one price may suggest an area of resistance.

The order book does not show “dark pools,” which are batches of hidden orders maintained by large players who do not want their trading intentions known to other traders. The presence of dark pools reduces the utility of the order book to some extent, since there is no way of knowing whether the orders shown on the book are representative of true supply and demand for the stock.

Order books continue to collate an increasing amount of information that is available to traders for a fee. Nasdaqs TotalView, for example, claims to provide more market information than any other book, such as displaying more than 20 times the liquidity of its legacy Level 2 market depth product. While this added information may not be of much significance to the average buy-and-hold investor, it may be useful to day traders and experienced market professionals for whom the order book is one of the most critical inputs in formulating trading decisions.