Order Book and Market Depth
1. What is the order book?
The exchange order book contains active buy and sell orders waiting for execution.
Your broker platform may show a simplified view of the best price levels and quantities.
2. Buy side and sell side
Buy orders are bids, usually displayed from highest to lower prices.
Sell orders are asks, usually displayed from lowest to higher prices.
The closest prices define the current spread.
3. Price priority
A higher buy price has priority over a lower buy price. A lower sell price has priority over a higher sell price.
Better prices are served before less competitive prices.
4. Time priority
When multiple orders have the same price, the earlier order generally receives priority.
This is why joining a long queue at the same limit price may not produce immediate execution.
5. Queue position
Platforms may not show your exact position reliably in every circumstance, but the principle remains: many shares may be ahead of your order.
A touch of your price does not guarantee your full quantity will execute.
6. Order modifications
Changing price or certain order details can affect priority because the exchange may treat the modified instruction as a new order.
The exact treatment follows exchange rules.
7. Displayed depth is incomplete
Most retail displays show only a limited number of price levels.
Hidden, iceberg or algorithmic behaviour may exist under market rules, and orders can change before your instruction arrives.
8. Circuit limits
Price bands restrict how far certain securities can move during a session under applicable rules.
At an upper circuit there may be buyers but no willing sellers. At a lower circuit there may be sellers but no willing buyers.
An order cannot guarantee exit when no counterparty exists.
9. Quantity freezes and exchange limits
Exchanges may impose maximum quantity or value conditions for individual orders, requiring large orders to be split.
Brokers may apply stricter internal controls.
10. Auction and settlement shortages
If securities are not delivered as required, exchange mechanisms may handle shortages through auction or other procedures.
The resulting obligations and prices can differ from the original trade, illustrating why operational compliance matters.
11. Spoofing and deceptive appearances
Large displayed orders may influence perception and can be cancelled before execution.
Manipulative practices are prohibited, but a beginner should still avoid treating one visible quantity as certain institutional intent.
12. Common beginner mistakes
- Assuming a large buy wall guarantees support
- The order may be cancelled or absorbed.
- Assuming touching the limit means full fill
- Queue position and available quantity matter.
- Trying to exit at lower circuit without buyers
- No order type can create liquidity.
- Reading five depth levels as the whole market
- Retail depth is a limited snapshot.
13. DStreet principle
Treat the order book as execution information, not as a standalone prediction system.
14. Beginner checklist
- I understand price-time priority.
- I distinguish displayed orders from executed trades.
- I know that queue position affects fills.
- I understand circuit and liquidity risk.
- I do not interpret a single depth snapshot as certainty.
15. Quick knowledge check
Question: What receives priority: a higher buy bid or lower buy bid?
Answer: The higher buy bid.
Question: At the same price, which order generally gets priority?
Answer: The earlier order.
Question: Can an upper-circuit buyer force a seller to appear?
Answer: No.
Question: Are displayed orders final?
Answer: No. They can be modified or cancelled before execution.
16. Next lesson
Settlement, Contract Notes and Records.