Limit order
Price bound
A buy limit sets a maximum execution price; a sell limit sets a minimum. A marketable limit can match existing orders immediately. A price touch does not guarantee a fill.
Order-book guide
How to Read a Derivatives Order Book
Learn bids, asks, depth, spreads and execution limits with a hypothetical derivatives order book and worked market and limit order examples.
Read the displayed prices and quantities first, then examine what they leave out. This guide uses one invented book throughout; its numbers are educational examples, not live quotes or executable offers.
What Is an Order Book?
A derivatives order book displays buy orders (bids) and sell orders (asks) for a particular contract, arranged by price. The feed determines the visible levels and detail; it does not reveal all trading interest.
Displayed interest
Hidden quantity and orders awaiting a trigger may be absent from the displayed book.
Price and quantity
A level groups displayed quantity at one price. Check whether the units are contracts, base quantity or another measure.
A changing snapshot
New orders, fills and cancellations change the book. Displayed size can disappear before another order reaches it.
Anatomy of an Order Book
The highest bid and lowest ask are the best displayed buy and sell prices. Read outward from those prices to compare the quantity at each level.
Hypothetical book
Five bid levels and five ask levels, with sizes expressed in BTC-equivalent units. These figures do not identify a live contract or exchange. Currency selection changes example symbols only, not the amounts.
| Example price | Size at this level (BTC-equivalent) |
|---|---|
| $67,245.00 | 2.50 |
| $67,240.00 | 5.10 |
| $67,235.00 | 12.30 |
| $67,230.00 | 8.75 |
| $67,220.00 | 25.00 |
| Example price | Size at this level (BTC-equivalent) |
|---|---|
| $67,250.00 | 1.80 |
| $67,255.00 | 3.40 |
| $67,260.00 | 7.20 |
| $67,270.00 | 15.60 |
| $67,280.00 | 30.00 |
Per-level bars use the same maximum on both sides. Equal widths therefore represent equal displayed quantities.
- Best example bid
- $67,245.00
- Best example ask
- $67,250.00
- Total displayed bids (BTC-equivalent)
- 53.65
- Total displayed asks (BTC-equivalent)
- 58.00
Reading Order Book Depth
Per-level size and cumulative depth answer different questions. A level shows quantity at one price; cumulative depth adds the levels from the best price outward on the same side.
| Example price | Cumulative size (BTC-equivalent) |
|---|---|
| $67,245.00 | 2.50 |
| $67,240.00 | 7.60 |
| $67,235.00 | 19.90 |
| $67,230.00 | 28.65 |
| $67,220.00 | 53.65 |
| Example price | Cumulative size (BTC-equivalent) |
|---|---|
| $67,250.00 | 1.80 |
| $67,255.00 | 5.20 |
| $67,260.00 | 12.40 |
| $67,270.00 | 28.00 |
| $67,280.00 | 58.00 |
Bid-side depth
A market-taking sell meets the highest bid first, then lower bids if more displayed quantity is needed.
Ask-side depth
A market-taking buy meets the lowest ask first, then higher asks if more displayed quantity is needed.
This calculation holds the displayed book fixed. It omits competing orders, cancellations, hidden quantity and replenishment, so it is not a fill forecast.
Understanding the Bid-Ask Spread
Subtract the best bid from the best ask to obtain the spread. Their average is the midpoint, a reference value that is not itself a promised execution price.
- Example spread
- $5.00
- Example midpoint
- $67,247.50
- Spread in basis points
- ≈ 0.743522
Divide the spread by the midpoint and multiply by 10,000 to express it in basis points. A fixed currency threshold does not classify liquidity across differently priced contracts.
The spread is one part of execution cost. Requested size, prices beyond the best quote and trading fees also matter. A narrow top-of-book spread does not ensure enough quantity for a large order.
Order Types and Execution
Order instructions constrain price, activation or execution behavior. The instruction name alone does not promise a complete fill or a particular fee.
Market order
Immediate execution request
A market order requests execution against available liquidity. Size, price protections and venue rules can leave some or all of it unfilled; the last displayed price is not a guaranteed fill price.
Stop-limit and stop-market
Conditional activation
A stop activates an order when its specified trigger condition is met. A stop-limit then has a limit price; a stop-market uses the venue’s market-order rules. Triggering does not guarantee execution at the trigger price or a complete fill.
Iceberg order
Partly displayed
An iceberg exposes only part of its total quantity at a time. Refresh behavior depends on the venue and order implementation; visible size need not equal the full order.
Post-only is a separate instruction
Post-only is intended to prevent immediate liquidity-taking execution. The venue determines what happens if the order would cross the book. It does not ensure that a resting order will later fill.
Maker and taker describe executions
An execution that removes resting liquidity is taker; an order can instead rest before providing liquidity to a later trade. Fees depend on the applicable product, account and execution. This guide quotes no current fee tier or guaranteed savings.
- Bybit — maker and taker execution
- Bybit — slippage tolerance and incomplete execution
- CME — price, trigger and time instructions
- CME — displayed order data and iceberg quantity
Worked Examples and Displayed Walls
Example priceSize at price (BTC-equivalent)
- Largest displayed bid
- 25.00 @ 67,220.00
- Largest displayed ask
- 30.00 @ 67,280.00
Both fill examples restart from the unchanged book, ignore fees and assume the displayed orders remain available. They calculate immediate matching only; they do not submit an order or predict a real fill.
Market-taking buy
This request uses all quantity at the first two ask levels and part of the third. Its average price is above the best ask because some quantity comes from higher levels.
- Requested size (BTC-equivalent)
- 10.00
- Immediately filled size (BTC-equivalent)
- 10.00
- Immediately unfilled size (BTC-equivalent)
- 0.00
- Fill price
- $67,250.00
- Filled size (BTC-equivalent)
- 1.80
- Quote amount before fees
- $121,050.00
- Fill price
- $67,255.00
- Filled size (BTC-equivalent)
- 3.40
- Quote amount before fees
- $228,667.00
- Fill price
- $67,260.00
- Filled size (BTC-equivalent)
- 4.80
- Quote amount before fees
- $322,848.00
- Total quote amount before fees
- $672,565.00
- Quantity-weighted average price
- $67,256.50
Marketable buy limit
The limit is the second ask price. Only the first two levels qualify, leaving part of the request unfilled immediately. The filled part takes existing liquidity; later treatment of the remainder depends on time-in-force and venue rules.
- Requested size (BTC-equivalent)
- 10.00
- Limit price
- $67,255.00
- Immediately filled size (BTC-equivalent)
- 5.20
- Immediately unfilled size (BTC-equivalent)
- 4.80
- Fill price
- $67,250.00
- Filled size (BTC-equivalent)
- 1.80
- Quote amount before fees
- $121,050.00
- Fill price
- $67,255.00
- Filled size (BTC-equivalent)
- 3.40
- Quote amount before fees
- $228,667.00
- Total quote amount before fees
- $349,717.00
- Quantity-weighted average price
- ≈ $67,253.27
Largest displayed bid
- Example price
- $67,220.00
- Size at this level (BTC-equivalent)
- 25.00
This is the biggest bid level in the example, not evidence that buyers will defend the price. It can be filled, changed or cancelled.
Largest displayed ask
- Example price
- $67,280.00
- Size at this level (BTC-equivalent)
- 30.00
This is the biggest ask level in the example, not evidence that price cannot rise through it. Displayed quantity alone does not establish a trader’s intent.
Spoofing and the Limits of Observation
A large or disappearing order does not by itself establish spoofing. The observation shows a change in displayed interest; it does not disclose why the order was entered or cancelled.
In its guidance on U.S. Commodity Exchange Act section 4c(a)(5)(C), the CFTC distinguishes prohibited intent to cancel before execution from legitimate, good-faith order changes. That legal scope must not be generalized to every jurisdiction or crypto platform.
What can be observed
- The price, displayed quantity and time of a book update.
- Whether a level remains visible, changes or disappears.
- Whether separate trade records show executions at that price.
What the display cannot establish
- The identity or intention behind an anonymous order.
- That a cancellation was manipulative rather than legitimate.
- That a displayed wall will remain or cause a price reversal.
Practical Checks
Separate open interest from resting orders
Open interest counts outstanding contracts, with one side counted for each buyer–seller pair. It is not pending book quantity. Rising aggregate OI alongside a bid wall does not identify that wall’s owner or confirm buying intent.
View OI Tracker →Use funding as contract context
For the cited Bybit perpetual mechanism, positive funding means longs pay shorts; negative funding reverses that direction. Funding and displayed depth alone do not establish a long- or short-squeeze forecast.
Check Funding Rates →Check the execution and fee conditions
Compare the current fee schedule with the actual order instructions. An immediately matched limit can be taker. A lower quoted fee is not a promised saving if the order does not fill or the market changes.
Compare Trading Fees →Distinguish traded volume from available depth
Volume records trading over a period; displayed depth is resting quantity at a moment. High volume does not by itself show how much can currently trade near the best price.
View Volume Tracker →- Bybit — maker and taker execution
- CME — volume and open interest definitions
- Bybit — funding payment direction
Frequently Asked Questions
What is a derivatives order book?
It is a display of bids and asks for a particular derivative contract. Feed depth and visibility rules determine what appears; hidden quantity and conditional interest may be absent.
What is the difference between bids and asks?
Bids are buy orders and asks are sell orders. The best bid is the highest displayed bid; the best ask is the lowest displayed ask.
What does order book depth mean?
It describes displayed quantity across prices. Per-level depth is the size at one price; cumulative depth adds levels outward from the best price. Neither is traded volume.
What is a spoofing wall?
The term refers to displayed orders associated with an intent to cancel before execution. Size or cancellation alone does not prove that intent; applicable legal rules and the full circumstances matter.
Can an order book establish support or resistance?
A concentration shows displayed interest at that moment, not a defended price. Orders can change or disappear, so a wall alone cannot establish that price will stop or reverse.
What is the bid-ask spread?
It is the best ask minus the best bid. Expressing it relative to the midpoint in basis points aids comparison; fees and quantity beyond the best quotes remain separate considerations.
Should I rely only on the order book?
It is an incomplete, changing view. Contract rules, execution constraints and other data add context; combining indicators does not by itself establish a forecast or a fill guarantee.
What does a buy wall show?
A comparatively large displayed bid at a price. The example identifies its largest bid using the same data as the table; no separate support assumption is added.
What does a sell wall show?
A comparatively large displayed ask at a price. The example identifies its largest ask using the same data as the table; it is not a ceiling on future prices.
Related Tools & Guides
Open Interest TrackerTrack live OI across top pairs.Funding Rate TrackerMonitor perpetual funding rates.Derivatives VolumeExchange volume comparison.Liquidation CalculatorCalculate your liquidation price.Futures Trading GuideBeginner-friendly futures guide.Spot vs FuturesKey differences explained.What Are Options?Call/put basics and strategies.Hedging with DerivativesPortfolio protection strategies.
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Sources and Scope
The sources explain specific feed, order and contract mechanics. The worked book is invented, venue implementations can differ, and no current fee schedule or market forecast is represented.
Source review date
- Bybit — maker and taker execution
- Bybit — slippage tolerance and incomplete execution
- CME — price, trigger and time instructions
- CME — displayed order data and iceberg quantity
- CFTC — U.S. anti-spoofing interpretive guidance
- CME — volume and open interest definitions
- Bybit — funding payment direction