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Market Microstructure & Execution·Limit Order Book Mechanics
Anatomy of the Order Book
10 min read
Two queues meeting in the middle
A limit order book is a live ledger of resting limit orders at each price level on both sides of the market. Bids (buy orders) sit on the left, descending in price; asks (sell orders) sit on the right, ascending. The best bid is the highest someone is willing to pay; the best ask is the lowest someone is willing to sell at. The gap between them is the spread.
Bid PriceSize
- 1.08212
- 1.08198
- 1.081822
- 1.08175
- 1.081618
Ask PriceSize
- 1.08219
- 1.082214
- 1.08236
- 1.082425
- 1.082511
Tip
Maker vs. taker
When you post a limit order at the best price and it sits, you're a maker — adding liquidity. When you cross the spread to fill immediately, you're a taker — removing liquidity. Most venues rebate makers and charge takers; net liquidity flow is what they price.