What is an Order Book?

An order book is an electronic list of buy and sell orders for a specific security or financial instrument organized by price level. An order book lists the number of shares being bid or offered at each price point, or market depth. Market depth data helps traders determine where the price of a particular security could be heading. For example, a trader may use market depth data to understand the bid-ask spread for a security, along with the volume accumulating above both figures. Securities with strong market depth will usually have strong volume and be quite liquid, allowing traders to place large orders without significantly affecting market price. More information is here.

Pricing scheme

Market depth looks like this, visualization could be different and it depends on software

BTC market depth on GDAX

Another way to visualize order books is a list with bids and offers

Order book list

Mid-price is the price between the best price of the sellers of the stock or commodity offer price or ask price and the best price of the buyers of the stock or commodity bid price. It can simply be defined as the average of the current bid and ask prices being quoted.

Our goal is to create a model that forecasts the mid-price.