Difference between Order book and Trade book

You may have come across terms like order book or trade book if you are just starting to trade F&O and equities, or if you plan on taking up online trading. What do these terms actually mean? And what is the difference between trade book and order book?

Continue reading to learn more about order book and trade book when it comes to online trading.

Order book vs trade book

An order book is a term that describes a collection of buy/sell orders to any security or financial instrument. It can be either electronic or manual, but it is e-list in online trading. All details of an order, including quantity and price, are stored in the order book. Every order gets a unique number to make it easy to find in the future. Real-time updates are provided to the order book. An order status can be'requested,' queued,' 'ordered,' 'executed,' 'part executed,' 'expired, canceled, or rejected.

Once an order is executed, it goes into the trade book. The trade book also lists the status of execution and assigns a trade number. Like an order book, the trade book can also be used for equity and F&O trading .

The main difference between trade book and order book is that trade book reflects trades executed, while order book reflects all orders placed.

We have more information about trade book vs order book for online trading:

• - While an order book can show the status of an order, ie, modification/cancellation/pending or even executed orders, the trade books shows a trader only details of an executed order. A trade book doesn't contain cancelled or pending orders.
• A market order is a purchase/sell order that is executed at the current market price in real-time. This is the most basic order and it is used when execution is more important than the price. This order is not only recorded in order book but it also appears in trade book quickly after it has been placed.
• Limit orders are when a trader wants to buy or sell an asset at a certain price. Limit orders don't usually see immediate execution. The trade book records the extent of execution if there is partial execution. Partial execution can also be called a partial fill. This is when some trade orders are filled at the desired/specific price. A limit order will not be reflected in the trade books if it is not executed. This is another example of an order book vs a trade book
• A stop order, also known as a stop loss or stop order, is an order that allows you to buy or sell when a certain price has been reached. The stop order becomes a market order when it reaches that price. A stop order is not effective until a price has been reached.
• You can also link to the trade book to make cash or securities settlements for every order that you have executed. Trade books keep track of all orders you have executed for the day. You can add or close trades directly from the book.
• Order book vs. trade book can help you understand how orders can be used in trading. A beginner might find market orders more intuitive as they are immediately executed and reflect in the trade books. Limit orders may be more valuable for serious traders. They don't appear in the trade books in a hurry.

Summarising

To sum it all, understanding the difference between order and trade books is crucial for anyone who wants online trading to be more successful. Because there are so many trading orders, it can be overwhelming to learn more. Angel One could help you understand the differences between order book and trade book online trading. You'll also be able trade seamlessly across platforms and have access to research.