You must have frequently come across terms like order book and trade book while trading online. Have you wondered as to what is the difference between an order book and a trade book? Let us look in detail at the order book vs trade book debate. This order book vs trade book debate is about the role of these two important books and how they interface with each other. Let us now look at the trade book vs order book debate in detail.
About Order Book and Trade Book
If you are an online trader in equities and F&O, you must be familiar with the order book and the trade book as part of your trading account. As the very name suggests, the basic difference between an order book and a trade book is that the order book records the orders placed and the trade book records the actual trades executed. That surely sounds simple. Let us look at the concept of order book vs trade book in online trading and how the trade book vs order book debate is key to your better understanding of the online trading process. We will also understand the difference between order books and trade books and look at some very important and critical order book trading strategies.
Here is what you must know about the order book
Whenever an order is placed by the trader in equity or F&O, the details of the order along with the quantity and the price is right away reflected in the order book of the trading account. There is also a unique order number that tags the order for future reference and you can quote this order for reference.
If a particular order is placed as a market order then it gets executed immediately, assuming there are market volumes which is a normal assumption in liquid stocks. Then it shows in the order book as an executed order. However, in the case of limit orders, the order would be executed if and only if the price conditions are met. In that case, the order portion not executed is shown as open position and not reflected in the trade book.
The order book can be modified till the order is executed. As a trader in equities or F&O, you have the luxury of modifying the order till the time the order is executed. For example, if the order has been placed but not executed then you can make a variety of changes to the order or even cancel the order. You can convert market order into limit order or the other way round. You can also modify the quantity and price at which you want the order executed.
The order book allows you to sort the order based on the exchange or the segment. For example, you can filter only the orders placed on the NSE or the orders placed on the BSE. Alternatively, you can also filter for the smart order routing or SOR orders. In addition, you can filter orders on asset classes like, you can filter orders based on equities, futures, or options.
Finally, the order book can be sorted based on the current status of the order. For example, orders can be fully executed, partially executed, rejected, modified, canceled, etc and you can sort on each of these parameters for your internal analysis. Additionally, when you place an Immediate or Cancel (IOC) order, then the order expires if it is not executed immediately. You can also sort your order book based on such expired orders or specific order types.
Here is what you must know about the Trade Book
When an order is executed on the exchange given and within the ambit of the stipulated conditions, actual execution status along with the trade number gets reflected immediately in the Trade Book. This applies to your equity trading, futures trading, and also to your options trading. The logic remains the same all along.
When market orders are placed in the order book, they are immediately executed so it gets reflected in the trade book as soon as such an order is entered in the order book. In the case of limit orders, the order may either be unexecuted or partially executed. Unexecuted orders are not shown in the trade book, as you must be familiar with them by now. In case of partial execution, the trade book will only reflect the extent to which the order has been executed.
Like in the case of the order book, even your Trade Book can be sorted on various parameters like the exchange, the trading segment, and also at times based on the instrument traded. Both the order book and trade book are reflected only for that particular trading day and you will find it empty the next day unless fresh orders are placed and executed in the trading account.
Here is something you may not have noticed. While a trade book is surely a record of your trades for the day, it also offers you a Call to Action from the trade book itself. For example, if you have bought a stock and the stock has gone up then your options are right there to close the trade, add more to the trade or extend to a SIP, etc.
If you are an online trader/investor, the order book and the trade book are very important sources of information for your audit trail and also an important log of your trade performance. Ideally, it is advisable to cross-check your order book and the trade book with the contract notes for each trading day so you are rest assured all is ok. Smart traders must also use the order book and trade book as a sounding board. If your order/trade ratio is too high, you need to rethink the way you are placing orders. Now that sounds interesting, right?
what do you need to know about trade books?
When an order is executed on the stock exchange within the stipulated conditions, the actual execution status along with the trade number is immediately reflected in the Trade Book in your online trading account. This applies to equity trading, futures trading, and also your options trading. The trading book is normally the outcome of your order book.
What Do You Need To Know About The Order Book?
When an order is placed in equity or F&O, the details of the order along with the quantity and the price are immediately reflects in the order book. There is also a unique order number with which that order is tagged for future reference. It shows orders that are unexecuted, partially executed, and fully executed.
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Frequently Asked Questions Expand All
When are order book and trade book updated?
Th order book and the trade book are updated by the system on a real time basis. As orders are placed, or as orders are executed, the order book gets updated. The trade book gets updated each time an order is actually executed within the parameters defined by the trader.
What are trade orders?
Trade orders are orders that are placed in the system and actually executed. These could be market orders or trade orders and once they are executed, they become trade orders. At that point they become irrevocable.
