Order book, orders and spread: how to read the market
The order book is a list of active buy and sell orders sorted by price. The best buy order and the best sell order stand opposite each other, and the difference between them is the spread.
The order book shows how much volume stands at each price level, where the market is dense and where it is thin.
What the order book is
The order book is not a chart or a trade history, but a snapshot of current orders at a specific moment. It has two halves: buy and sell. Sell is sorted by ascending price, buy by descending, so the best prices always meet in the middle.
On a physical market, every line of the order book is backed by a real commodity, not an abstract ticker. That is why a line describes not only price and volume but also a specification.
| Order book element | What it shows | What to look at |
|---|---|---|
| Best bid | the maximum demand price | how much volume is ready to be bought at that price |
| Best ask | the minimum offer price | how much volume is ready to be sold |
| Spread | the difference between the best prices | the width of entry into and exit from the market |
| Volume at a level | the quantity at one price | the thickness of support or resistance |
| Depth | the volume at several levels | how far one must go to move the price |
| Imbalance | the difference in volume between the two sides | in whose favour the market currently is |
Why the spread is the market
The spread is the main indicator of liquidity. A narrow spread means buyers and sellers stand close together and a trade can be matched with almost no loss in price. A wide spread speaks of a thin market: there are few willing participants, and entry costs more.
In steel products the spread is wider than in financial instruments, and that is normal. Behind an order stands a physical commodity with a specific grade, size, surface, delivery basis and shipment week. A position cannot be closed instantly — first a match with a suitable counter-order is needed.
The width of the spread also depends on the product range. Fast-moving positions such as 2B sheet or 57×3 pipe collect more orders; rare sizes and special grades form thin levels with a wide spread.
Active and passive order
| Feature | Active order | Passive order |
|---|---|---|
| How it behaves | crosses the spread and takes volume | stands in the book and waits |
| Price | at the best opposite price | its own, no worse than the market |
| Speed | matched immediately or partially | matched when a counter-order arrives |
| Influence | moves the price | forms depth |
| Risk | executing at a worse price than wanted | not executing at all |
On the GCX exchange an order is binding: it enters the market and is matched automatically when the parameters coincide with a counter-order. An order lives in one market — one commodity, one currency, one unit of quantity — and the delivery points of the parties must overlap.
There are also restrictions that protect against an accidental trade: an order is not matched with itself or with an order from a colleague at the same company. An unmatched order expires on the Monday of its shipment week — the week is counted according to ISO, from Monday to Sunday, and it must coincide exactly.
How to read depth
Depth shows what will happen to the price if the volume grows. The order of reading is this:
- Look at the density near the best prices. A large volume at two or three levels means the price is stable.
- Estimate how many levels your volume needs to pass. If your whole batch accounts for one level, the price will move.
- Find the thin spots. Where the volume is small, one large order is enough for a level to disappear.
The quotation list collects the best prices by position and serves as a guide for the day. A counter-order is an order from the opposite side whose parameters suit yours; it is what leads to a match.
Behind depth there are always specific specifications, not just figures. Stainless steel for sulphuric acid means grades with molybdenum, 316L or 904L, not 304: a different composition is chosen for an aggressive medium. Such orders stand at a separate level, and the spread on them is wider than on fast-moving 2B sheet.
Frequently asked questions
What is an order book?
It is a list of active buy and sell orders sorted by price. The best prices meet in the middle, and the difference between them is the spread. The order book shows the current state of the market, not the history of trades.
What is a spread in simple words?
The difference between the best sell price and the best buy price. A narrow spread means a liquid market where matching is easy. A wide spread is a sign of a thin market and an expensive entry.
How does an active order differ from a passive one?
An active order crosses the spread and takes volume from the book; a passive one stands in the book and waits for a counter-order. The active one executes faster but moves the price; the passive one gives a better price but may not execute.
What is a quotation list?
A summary of the best prices by position at a certain moment. It is convenient for orientation before placing an order.
What is a counter-order?
An order from the opposite side of the market whose parameters suit yours: commodity, volume, price, basis and shipment week. When the parameters coincide, the orders are matched automatically and the trade is recorded.
Why is the spread on metal wider than on shares?
Because behind the order stands a physical commodity with a specific specification and shipment week. A position cannot be closed instantly; a counter-order with suitable parameters is needed, so the market pays for liquidity with a wider spread.
How can you tell that the market is liquid?
By the spread and the depth: a narrow spread and a large volume at several levels near the best prices mean that matching will pass without moving the price.
View orders and quotations
The order book is formed from binding orders for physical metal. To read it confidently, understand how orders are matched and what happens after a trade.