Limit Order Book

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Definition of 'Limit Order Book'

A limit order book is a list of all the limit orders that have been placed for a particular security. The orders are listed in chronological order, with the oldest orders at the top of the book and the newest orders at the bottom.

Each order is represented by a row in the book. The row includes the following information:

* The stock symbol
* The number of shares being bought or sold
* The limit price (the maximum price that the buyer is willing to pay or the minimum price that the seller is willing to accept)
* The time the order was placed

The limit order book is an important tool for investors because it provides them with information about the current supply and demand for a security. By looking at the limit order book, investors can get a sense of the price range that the security is likely to trade in.

The limit order book can also be used to identify potential trading opportunities. For example, if an investor sees that there are a lot of limit orders for a stock at a certain price, they may decide to place a market order to buy the stock at that price. This is because they know that there are buyers who are willing to pay that price, so they are confident that their order will be filled.

The limit order book is a valuable tool for investors, but it is important to understand how it works before using it. By understanding the limit order book, investors can make more informed trading decisions.

Here are some additional details about the limit order book:

* The limit order book is constantly updated as new orders are placed and filled.
* The highest bid price is the highest price that a buyer is willing to pay for a security. The lowest ask price is the lowest price that a seller is willing to accept for a security.
* The difference between the highest bid price and the lowest ask price is called the bid-ask spread.
* The limit order book can be used to determine the market depth for a security. Market depth refers to the number of shares that are available to be bought or sold at a particular price.
* The limit order book can also be used to identify potential arbitrage opportunities. Arbitrage is the simultaneous purchase and sale of a security in different markets in order to profit from the difference in prices.

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