How Stock Order Books Work
An order book lists eligible resting orders at a venue under that venue’s visibility rules. It shows quoted depth rather than all potential trading interest or a guarantee of future prices.
How it works
Price levels aggregate quantities, and priority rules determine which orders execute first. Hidden or reserve orders, cancellations and other venues make the visible book incomplete. A market order can consume multiple levels; a limit order joins or improves quoted liquidity but may not fill.
Worked example
The ask book displays 100 shares at 10.00 and 200 at 10.02. A market buy for 250 would, if nothing changes, consume 100 at 10.00 and 150 at 10.02, costing 2,503 and averaging 10.012. Another order or cancellation before arrival can change this result.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
Displayed size can disappear and does not reveal beneficial ownership. Spoofing is prohibited conduct in many markets, but identifying it requires more than one snapshot. Do not equate a large displayed bid with a guaranteed floor.
Knowledge check
Why can a fill differ from the book you just saw?
Read the explanation
The book changes while the order travels, and competing orders, routing, hidden liquidity and venue rules affect execution priority and price.
References and further reading
- SEC Investor.gov: stocks, ownership and risks
- SEC: company filings and financial reports
- SEC: beginners’ guide to financial statements
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.