Difference between an Order Book and a Trade Book

Difference between an Order Book and a Trade Book

If you’re an experienced trader or just a beginner who has just started trading or thinking to take up online trading in equities and F&O, you would have come across these terms called order book and trade book. These two different terms are standard and widely used in trading.

An order book is a list of all the orders that are used to describe all buy and sell orders for a specific security or financial instrument.

The list of orders can turn out to be electronic or manual, but when it comes to online trading, it is an electronic list.

When a consumer books an order, the order book records all of the essential information, including the price and quantity of the order.

Later on, each order is given a unique number that a consumer can use to refer to it later.

Once it is completed, an order is then entered into the trade book. The trade number is assigned to the completion, and once it is executed, the status reports in the trade book.

The trading book is used by the stock, futures, and derivatives market, including the order book.

The significant difference between the order book and the trade book is that the order book reflects all orders that have been placed, while the trade book reflects all the transactions that have already been completed.

  • While an order book displays the state of an order such as cancellation, modification, pending and even all the completed instructions, a trade book only shows the detail of a completed order to a trader.
  • However, orders which are canceled or pending have no space in a trade book.

  • A trading order simply means a buy and sell order completed at the current market price and real-time.
  • It is among the easiest and simplest orders which are used when execution is more essential than cost. When such an order is placed, it is entered in the order book and also gets entered in the trade book.

  • Limit orders are generally used where the trader is excited about buying and selling a particular commodity or asset at a specific price. However, limit orders are not immediately completed.
  • If a partial execution takes place, the trade book records the execution to the extent. Partial execution, also known as partial fill, appears only when a specific part of a trading order files at a particular or desired price.

    One primary difference between an order book and a trade book is that if a limit order is not completed, it will not be seen in the trade book.

  • A stop or stop-loss order is an order that allows you to buy and sell stocks until the predetermined price is achieved.
  • Once the stop loss order reaches a particular price, it then turns into a market price. However, a stop-loss order will not be reflected in the trade book until the time where a specific price is reached.

  • The trade book also contains links that allow you to carry out securities and cash settlements for each completed order.
  • The trade book not only keeps a whole track of all the completed orders but also allows you to add close or further trades from the book.

  • By looking at and understanding the order book vs. trade book will help you to understand orders and how they can be used while trading.
  • If you’re a beginner, business orders will be better for you because they are immediately executed and records in the trade book.

    However, an online trader who is more serious may find particular value in limit orders because the orders do not reflect in the trade book, while the trader is in a hurry.

  • What is Order Book?
  • An order book is a list of all the orders that are used to describe all buy and sell orders for a specific security or financial instrument.

  • What is the major difference between an order book and a trade book?
  • The significant difference between the order book and the trade book is that the order book reflects all orders that have been placed, while the trade book reflects all the transactions that have already been completed.

  • Which details are showed in the trade book and the order book?
  • A trade book only shows the detail of a completed order to a trader while an order book displays the state of an order such as cancellation, modification, pending and even all the completed instructions.

  • What does stop or stop loss order means?
  • A stop or stop-loss order is an order that allows you to buy and sell stocks until the predetermined price is achieved.

  • What does trade book contains?
  • The trade book also contains links that allow you to carry out securities and cash settlements for each completed order.

    The trade book not only keeps a whole track of all the completed orders but also allows you to add close or further trades from the book.

Final Thoughts

Knowing and understanding the difference between the trade book and order book is essential for every trader who wishes to take online trading in a serious manner.

Since there are several different orders that are important for you to learn and learning more errors in-depth can be challenging at start.

However, you can simply open a demat and trading account with Nirmal Bang to get a clear and better understanding of the difference between a trade book and an order book in online trading and what things contain in these two different books.

Understanding about trade book and order book will help you to trade effortlessly across several platforms and you’ll gain major access from research.