Order book & orders
The order book
An exchange matches buyers and sellers through an order book. Bids are buy orders waiting below the price; asks are sell orders waiting above it. The gap between the best bid and best ask is the spread.
Market vs limit orders
A market order fills right away against the book. In a thin book it can eat through several prices and fill worse than you saw: slippage. A limit order sits in the book at your price and waits.
Maker and taker fees
Limit orders that rest in the book add orders (you are a maker) and usually pay lower fees. Market orders take orders from the book (you are a taker) and pay more.
Remember: Patient limit orders are cheaper.
Test yourself
Bids in the order book are…
Buy orders waiting below the priceAsks are the sell side.
Best bid $100.00, best ask $100.20. The spread is…
$0.20Ask minus bid.
You place a market order for a small coin with a thin order book. The risk is…
Slippage: filling at worse prices than you sawA market order eats through the book until it is filled.
Which usually pays lower fees?
A limit order resting in the book (maker)Makers add orders to the book and are rewarded for it.
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