A Simple Order Book represents a foundational market microstructure component that displays a real-time list of outstanding buy and sell orders for a particular trading pair, organized by price level. In crypto exchanges, it provides a transparent view of current market demand and supply, illustrating the aggregate quantity of bids (buy orders) and asks (sell orders) at various price points, offering immediate insight into market depth and potential price movements.
Mechanism
The mechanism of a simple order book involves continuously aggregating and displaying limit orders submitted by market participants. Buy orders below the current market price (bids) and sell orders above the current market price (asks) are arranged by price, with the highest bid and lowest ask forming the “top of the book” or spread. When a new market order or a limit order crosses the existing spread, a trade executes, and the order book dynamically updates to reflect the new liquidity landscape.
Methodology
Traders and smart trading algorithms utilize the information from a simple order book as a primary methodology for short-term price
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