Limit Order Book Theory

Limit Order Book Theory models how buy and sell orders for a financial asset are organized and matched in a trading market. It displays all outstanding orders at different price levels, with the highest buy prices and lowest sell prices forming the "order book." Traders place limit orders specifying the maximum they're willing to pay or the minimum they're willing to accept. The order book helps reveal market supply and demand, price discovery, and liquidity. Understanding its dynamics assists traders and analysts in predicting price movements and market behavior based on the available buy and sell interests.