Order Book
Definition
An order book is a real-time list of all buy and sell orders for a prediction market, organized by price level. It shows the depth of the market and helps traders understand supply and demand at different price points.
Structure
Bid Side (Buy Orders)
- Listed in descending order (highest to lowest)
- Shows price and quantity traders want to buy
- Represents demand for contracts
Ask Side (Sell Orders)
- Listed in ascending order (lowest to highest)
- Shows price and quantity traders want to sell
- Represents supply of contracts
Example Order Book
ASK (Sell Orders)
$0.55 → 100 contracts
$0.53 → 250 contracts
$0.52 → 500 contracts
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SPREAD: $0.04
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BID (Buy Orders)
$0.48 → 500 contracts
$0.47 → 300 contracts
$0.45 → 150 contracts
Key Information
Best Bid: Highest price someone will pay ($0.48)
Best Ask: Lowest price someone will sell ($0.52)
Spread: Difference between best bid and ask ($0.04)
Mid Price: Average of best bid and ask ($0.50)
Order Book Depth
Deep order books have:
- Many orders at multiple price levels
- Large quantities available
- Indicates high liquidity
- Better for large trades
Shallow order books have:
- Few orders, limited price levels
- Small quantities
- Indicates low liquidity
- Risk of slippage