Order Types and the Order Book

Market Orders

A market order says: "I want to trade immediately at the best available price."

// Buy 100 shares of AAPL at market price
// Best ask is 150.05 for 30 shares, then 150.06 for 100 shares
// You pay: 30 shares × 150.05 + 70 shares × 150.06 = 15,008.50

Market orders always fill but you don't control the price.

Limit Orders

A limit order says: "I want to trade at a specific price or better."

// Buy 100 shares of AAPL at $150.00 or better
// If the ask is $150.05, your order sits in the book
// It only fills if someone sells at $150.00 or lower

Limit orders give you price control but may not fill at all.

How the Order Book Matches Orders

The exchange maintains a sorted list of orders by price:

• Buy side (bids): sorted highest first (willing to pay the most)
• Sell side (asks): sorted lowest first (willing to sell for the least)

Bids              |  Asks
100.03 × 50       |  100.05 × 30
100.02 × 100      |  100.06 × 200
100.01 × 75       |  100.07 × 150

When a new market order comes in:

• A buy market order hits the lowest ask (100.05) first.
• A sell market order hits the highest bid (100.03) first.

Order Book Depth

The depth of market (DOM) shows how many shares are available at each price level. It tells you:

• How much volume is available before the price moves (slippage).
• Where large buy/sell walls exist.

High liquidity (many orders at each price) means you can trade large quantities with minimal price impact.