How to read an order book: bids, asks, spread, depth and walls

An order book is the list of resting limit orders on an exchange. Learning to read one is the cheapest protection against bad fills. The two sides - Bids: offers to buy, highest price at the top. - Asks: offers to sell, lowest price at the top. - The spread is the gap between the best bid and the best ask. A wide spread means a thin market; crossing it costs you the spread immediately. Market versus limit A market order takes whatever is on the other side until it is filled. In a thin book, a large market order walks down through several price levels, and your average price is far worse than the top price you saw. A limit order sets the worst price you will accept and waits. Depth Add up the size on each side within, say, 2% of the mid price. That tells you how much you can trade before moving the price 2%. Depth matters more than the last traded price, which can be set by one tiny trade. Walls A wall is a single very large order at one price. It can be real support or resistance, or it can be bait: an order placed to make others think the price cannot pass a level, and pulled before it is hit. Placing orders you intend to cancel to mislead others is called spoofing, and on regulated markets it is illegal. On crypto exchanges, assume any wall might vanish. Order books versus AMMs A pool-based exchange such as KulaSwap has no order book. Price comes from the ratio of the two assets in the pool, and slippage comes from pool size. The same discipline applies: check the price impact before you confirm. Wiki: https://wiki.soapbox.community/wiki/Order_Books__Buy_Walls__and_Sell_Walls https://wiki.soapbox.community/wiki/Liquidity__Slippage__and_AMMs https://wiki.soapbox.community/wiki/Supply_and_Demand__the_Price_Basics