How to read a public order book in ten minutes

How to read a public order book in ten minutes

A note from the numbers desk. No course, no signup: everything below works on any public exchange page with an order book.

1. Two columns, one price. The bids are what people offer to pay. The asks are what people offer to sell at. The gap between the best bid and the best ask is the spread. A tight spread means many people agree on the price. A wide spread means nobody agrees, and your first trade will pay for that disagreement.

2. Depth beats quotes. The top quote is one opinion. The wall of numbers behind it is the real market. Before you trade, look at how much sits between your price and the next price. Thin books jump. Deep books walk.

3. Watch the book, not the news. Price charts tell you what happened. The live book tells you what people are doing right now. If a price moves and the book behind it is empty, the move is a whisper, not a crowd.

4. Do the rounding math. Small markets round prices aggressively. If the tick size is large compared to the price, the spread can never get tight, and that tells you something honest about the market you are looking at.

5. Try it with nothing at stake. Pick any public book. Write down the best bid, the best ask, and the first level where depth thins out. Come back an hour later and check your notes against the book. Ten minutes of this teaches more than a week of headlines.

That is the whole method. The book is public, so every claim here is checkable the moment you read it.