Meaning and Difference Between Order Book and Trade Book: While trading in the stock market, you come across various terms that are related to the market.

Understanding these terminologies helps us get a better understanding of how the market works. Two of the terms you will come across while being involved in the market order book and trade book.

In this article, we will be discussing the meaning and difference Between Order Book and Trade Book. So, let’s go straight into the topic, Keep reading to find out more!

Meaning And Difference Between Order Book And Trade Book

Meaning Of Order Book

The term order book is used to describe a list of buy/sell orders for any securities or financial instrument which is in the form of an e-list in the world of online trading.

All the details of the orders, including the price and the quantity, are recorded in the order book every time the order is placed.

Every order in the order book will be assigned a specific number that can be used as a future reference and the order book also provides real-time updates.

The status of these orders will be classified as ‘requested’, ‘queued’, ‘ordered’, ‘executed’, ‘part executed’, ‘expired’, ‘canceled’, or ‘rejected’.

Meaning Of Trade Book

A trade book is a place where your order gets entered after they are completed/executed. The trade book reflects the execution status along with the trade number in your account.

The process of trade book is used in equity trading, futures trading, and also in your options trading.

When your orders are executed at market order, they are reflected immediately in the trade book as the orders get executed immediately.

But in the case of limit orders, if the orders only get partially executed, only the partially executed orders will be reflected in the trade book.

What Is Difference Between Order And Trade?

Following are the ways in which order book and trade book can be differentiated:

While an order book will display the status of an order such as modification, cancellation, pending, or even execution, a trade book will only display the orders that are executed.

While the market orders are entered in both the order book and trade book almost simultaneously. The limit orders will only get entered in the trade books as and when they get executed.

While a stop loss order is shown in the order book, it will in be only reflected in the trade book until the order reaches the specified price and the stop order turns into a market order.

An advantage a trade book has over an order book is it has links to carry out cash/securities settlements for each order that has been executed.

Also, the trade book not only keeps track of all of your filled orders for the day, but it also lets you add new orders or remove existing ones.

Also Read: Best Books on Derivatives – Top 6 Derivatives Trading Books!

In Closing

In this article, we discussed the meaning and difference Between Order Book and Trade Book.

Though learning about these various concepts can look daunting to a beginner, examining the order book and the trade book will help you understand orders and how they are employed in trading.

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