The Order Book: How Trades Get Matched
When you press buy, you are not buying from the company. You are buying from another investor, and the exchange's order book pairs you up.
Why this matters for beginners
Knowing how orders are matched explains why the price you see is not always the price you get. This is general education, not personal advice.
Main explanation
An exchange keeps a list of everyone who wants to buy (bids) and everyone who wants to sell (asks), sorted by price. This list is the order book.
The highest bid and the lowest ask sit at the top. A trade happens when a buyer is willing to pay what a seller is asking.
Orders at the same price are usually filled first come, first served. Earlier orders get priority.
A large buy order can use up all shares at the lowest ask and continue to the next, higher asks. This is how a single big order can push the price up.
Example using a real company
A popular stock like Apple has thousands of shares waiting at each price level, so ordinary orders barely move it.
- →Asks: 100 shares at 10.00, 200 at 10.05. A buy order for 250 shares fills 100 at 10.00 and 150 at 10.05.
- →Bids: 300 shares at 9.95. A seller who wants to sell immediately gets 9.95.
Common beginner mistakes
- ✕Thinking you buy shares directly from the company.
- ✕Assuming a large order will fill at the price on screen.
Key terms
- Order book
- The live list of buy and sell orders at each price.
- Bid
- The price a buyer is willing to pay.
- Ask
- The price a seller is willing to accept.
Key takeaways
- 01Every trade pairs a buyer with a seller.
- 02Big orders can walk through several price levels.
Check yourself
- 01Who do you usually buy shares from on an exchange?
- 02What sits at the top of the order book?
- 03Asks are 100 at 10.00 and 200 at 10.05. What happens to a 250-share buy order?
Try the concept on a real company
Open a large company in the Analyzer and notice how widely its shares are traded.
Educational examples only. Not buy or sell recommendations.