Imagine a room where buyers line up on the left and sellers on the right. The person at the front of each line sets the best bid and best ask. The gap between them is the spread. When a buyer gets impatient and crosses over to the seller's side at their price, a trade happens.
Live order bookSimulated
Mid price
A market order hits
103.07102.0599.00
100 s agonow
PriceSize
103.702.12
103.606.99
103.504.24
103.104.72
102.309.20
102.104.96
spread0.10
102.006.64
101.901.53
101.7014.32
101.3012.42
101.108.98
100.907.20
- Mid
- 102.05
- Spread
- 0.10
- Last trade
- —
- Order size
- 10.0
Try placing a market buy with a large size. Watch how the order eats through the ask side, consuming liquidity level by level. The spread widens. The midprice shifts. This is in its most elemental form.
Biais, Hillion & Spatt (1995) showed that the shape of the order book — not just the best price — contains predictive information about future price dynamics. The distribution of depth across levels reveals strategic positioning before it shows up as obvious price moves.
The book above is simulated. Our measures the depth of real books, and there's a free sample to try.