Order Book and Trade Book: Meaning & Difference

A list of buy/sell orders for any securities or financial instrument is referred to as an order book. Either manual or electronic, this list is known as an e-list in the online trading community. The price & quantity of each order are entered into the order book each time it is placed. Additionally, each order is given a unique number so that it can be found later. The order book is updated in real time. Order statuses include "requested," "queued," "ordered," "executed," "part executed," "expired," "canceled," & "rejected."

An order is recorded in the trade book after it is performed. A trade number is given, & the trade book has a listing of the execution's status. Similar to an order book, the trade book is also utilized in F&O & stock trading.

The order book reflects every order that has been placed, but the trade book reflects the transactions that have actually been completed. This is the main distinction between the two books.
 

Order book: Meaning

Similar to trading tool, order book displays what individuals are now looking to purchase & sell. It displays list of all requests made to trade specific item, such as stocks. Price ranges that customers are ready to accept / pay, amount they wish to trade, kind of order (limit / market), & whether order is partially completed, cancelled, / still pending are all included in this list.

Order Book's primary function is to assist traders in determining when & at what price to enter / exit deal. To help them make informed judgments, traders may use Order Book to see how much supply & demand there is at various prices. As new orders are received, completed, / cancelled, Order Book is updated in real-time. This makes it easier for traders to recognize how market is moving quickly. Additionally, it illustrates how their orders fit within bigger scheme of trading.

How does order book work? 

Order books serve as essential operational framework of every financial marketplace, promoting market transparency & easing transactional activity. This is detailed explanation of how these order books function to support continuous trading of securities & maintain viability of market.
 

Trade Book: Meaning

How to Read Trade Book Trade Book now performs new function. It resembles history book detailing every deal that has ever been made with certain item, such as stock. Deal Book keeps track of details such as price & quantity of shares / contracts exchanged, as well as precise moment of each deal.
Trade Book is akin to record of past events, as opposed to Order Book, which displays current events. trade remains in Trade Book after it is entered. Its primary function is to provide traders with history of all transactions involving certain asset. With use of this historical data, traders may identify trends, monitor price movements over time, & assess efficacy of their trading tactics. Unlike Order Book, which displays real-time information for all platform users, Trade Book is often only accessible after trades have occurred.

Uses of trade book

Trade book, on other hand, records all transactions that have been executed. It reflects only orders that have been converted into trades, providing historical record of all buy & sell transactions. Trade book is essential for post-trade analysis, helping traders & investors review their past trades, assess their performance, & develop long-term strategies. It includes details such as price at which trade was executed, quantity traded, & time of transaction. This information is crucial for compliance, auditing, & performance evaluation purposes.
 

Difference between order book & trade book

Facts in order book & trade book online trading

1. A trade book simply provides traders with details about completed orders; in contrast, an order book includes all order statuses, including cancellation, modification, pending, & even completed instructions.
On the other hand, canceled or pending orders take up no space in a trade book.

2. A trading order is only an order to buy & sell that is fulfilled in real time & at the going rate.
This is one of the most straightforward orders to employ when cost is less important than execution. When one of these orders is placed, it is recorded in both the trade book & the order book.

3. When a trader is enthusiastic about purchasing & disposing of an asset or commodity at a given price, limit orders are typically utilized. Limit orders, however, take time to process.

The trade book documents the execution to the degree that it occurs, if there is a partial execution. Only when a portion of a trading order files at a certain or desired price does partial execution, often referred to as partial fill, occur.

A limit order will not appear in the trade book if it is not fulfilled, which is one of the main distinctions between an order book & a trade book.

4. A stop order, also known as a stop-loss order, enables you to purchase & sell stocks up until the pre-established price is reached.
The stop loss order becomes a market price when it hits a certain price. Nevertheless, a stop-loss order won't show up in the trading book until a certain price is reached.

5. You may also execute securities & cash settlements for each completed order using the links in the trading book.
You can add closure or subsequent transactions from the trade book in addition to keeping track of all completed orders.

6. Gain a better knowledge of orders & their applications in trading by examining & analyzing the order book vs the trade book. Business orders are ideal for beginners since they are executed right away & recorded in the trade book.

Limit orders, on the other hand, may be very useful to a more serious online trader because they don't show up in the trade book while the trader is rushing.

Conclusion

In conclusion, anyone who want to approach online trading more seriously has to comprehend the distinction between an order book & a trade book. Because there are so many different kinds of trade orders, learning more about them might seem overwhelming at first. To learn more about online trading & the differences between order books & trade books, you may establish a demat trading account with 5 Paisa. Additionally, you will have access to research & be able to trade seamlessly between platforms.