Reading an Order Book
What is the book telling you before you place anything?
The idea
An order book lists resting buy bids and sell asks; the gap between the best prices is the spread.
In the real world
Thin asks above price mean a moderate buy may climb several price levels.
Going deeper
The book shows where resting orders sit, which tells you where price can move easily and where it will meet resistance. Heavy bids below cushion a fall; thin asks above mean a buy will climb quickly through empty levels.
The asymmetry is what carries information. A book stacked on one side is not a prediction, but it does say that a move in one direction will be cheaper than the other. It is also not stable: resting orders can be pulled instantly, and some are placed specifically to be seen rather than filled.
Where it stops applying
Displayed depth is only part of the real liquidity. Hidden and iceberg orders, plus market makers who will quote on request, mean the visible book both overstates and understates what is available.
Why it matters
It shows where price is likely to move easily and where it will meet resistance from real resting orders.
Try this today
Inspect spread and cumulative depth before placing a trade.
Test yourself
Bids are stacked heavily just below the price and asks above it are thin and scattered. What does a moderate market buy do here?
Show the answer
Climbs quickly. With little resting supply above, each unit of buying consumes a level and reaches for the next, so price rises faster than the size alone suggests. The heavy bids cushion a fall; they do nothing to slow a rise.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.