An order book displays current buy and sell orders for a security, showing price levels, quantities, and market depth available at different prices. Order books provide transparency into market liquidity and help traders assess potential price impact from their transactions. Electronic markets maintain continuous order books updated in real-time.

Order book analysis helps traders understand supply-demand dynamics, identify support and resistance levels, and optimize order placement timing. Large orders in the book can indicate institutional interest, while thin order books suggest potential volatility. Understanding order book dynamics improves execution quality and market timing.

Real-world example: EUR/USD order book shows 10 million units bid at 1.1050 and 15 million units offered at 1.1052, providing traders with visibility into available liquidity and potential market impact from large transactions.