How do buy and sell orders work and what is an orderbook?

Orderbook:

The orderbook is a tool for transparency of orders that have been configured to be executed when the asset reaches a predefined value, being it higher or lower than the momentary quote of the asset.

There are different types of orders, let's talk about the 3 main ones:

Market Order
Market order executes the purchase or sale using the orders that are already placed in the orderbook.

For example, using the image above, the asset price is USDT 5.30, but the first sales order (table in red, see from the bottom up) is 5.31. So when executing a market order of USDT 1000.00 the purchase will be at 5.31 and not at 5.30 which is the current quote.

Another example, if the user buys USDT 10000 in this asset, his purchase will consume sales orders from 5.31 to 5.32. For the sale order of 5.31 is only USDT 4557.30 and to buy all USDT 10,000.00 will consume the next orders.


Limit Order

A limited order is one that establishes a limit price, maximum or minimum, by which the user must buy or sell a certain stock, which cannot be exceeded. Thus, allowing the control of the execution price, in addition to total control of the operation.

Example: The price of the asset is USDT 5.30 and the limited purchase order has been set at USDT 5.25. Then the purchase price will be USDT 5.25, but your order will only be filled when you have sell orders in this amount. Until that happens, your order will be available to be viewed in the orderbook.

Applies either to buy and sell.


Stop-limit Order

This type of order works through price triggers. The user sets up a trigger and a buy or sell price. So your order is not available in the orderbook until the trigger is activated, as soon as it is activated, the order in the orderbook is placed.

For example: Let's assume that the value of asset X is USDT 100, but the user will only accept a loss of a maximum of 5%. It will set the trigger (stop) at USDT 96 and limit order at USDT 95. If the asset price reaches USDT 96 activates the trigger (stop) and the limit order in the market of USDT 95 is placed at orderbook.