Understanding market data is a critical part of an investment strategy. The order book provides key pieces of information, including pricing and volume data, which is reported by trading venues. This data gives investors transparency into the supply and demand of stocks to inform trading decisions.
Market data provides critical insights into the trading of a stock and the overall health of the markets. Whether you’re trading US stocks, European equities, or Asian-listed shares, understanding market data helps you to follow price trends, gauge demand, and interpret market dynamics.
Today’s investors have access to an enormous amount of data, but two key metrics form the foundation of smart trading: price data and volume data.
What is an order book?
An order book is a real-time list of all the available buy and sell orders available for a particular stock in the market, organised by
- Bid – Indicates the price at which a buyer is willing to pay for a security and how many shares. The highest bid represents the maximum price a buyer is willing to pay.
- Ask – Indicates the price at which a seller is willing to accept and how many shares they want to sell at that price. This can also be referred to as the offer.
| Bid Size | Price ($) | Ask Size |
|---|---|---|
| – | 101.50 | 925 |
| – | 101.00 | 350 |
| – | 100.50 | 150 |
| – | 100.00 | 50 |
| 125 | 99.50 | – |
| 300 | 99.00 | – |
| 800 | 98.50 | – |
Understanding the order book is important because it provides insights into the supply and demand of a stock. It can be used to see price levels at which greater numbers of buyers and sellers would trade, help to anticipate market movements, and optimise order placement.
Tip: Top of Book data shows the best available prices for buyers and sellers.
What is the bid/ask spread?
The bid/ask spread is the difference between the highest bid and lowest ask price. Sometimes the spread is represented by a percentage, which is calculated by dividing it by the sale price.
For example, if a stock’s bid is $80.45 and its ask is $80.48, then the spread is $0.03 or .04% when calculated as a percentage of the ask price.
Tip: You can use percentage spread, not dollar spread, when comparing stocks with different price levels or from different global exchanges.
Why does the spread matter?
The spread reflects market liquidity and trading activity:
- Tighter spreads typically mean high liquidity and lots of active trading.
- Wider spreads often occur in less liquid stocks or during volatile periods.
The spread can also help you to decide whether to use a market order (executed immediately) or a limit order (executed only at a specific or better price).
Why is order size important?
The size of the bid and ask tells you how many shares are available at each price level. This is key to managing order impact, especially in less liquid stocks, where large trades can move prices dramatically.
When a stock has a lot of
How do I track real-time trade activity?
You can keep track of the trades as they happen with Last Sale data. Last Sale data includes the price the buyer and seller agreed to, how many shares were exchanged and at what time the trade occurred.
Tip: Use real-time market data when making trading decisions and use delayed market data to track a stock’s performance.
Where does market data come from?
Market data comes directly from the exchanges where the trade is executed.
The distribution of market data provides important transparency to what is going on in the market. There are multiple tiers of data available to investors.
- Level I Data – Top of book (best bid and ask)
- Level II Data – Depth of book (full view of the order book across price levels)
Final Thoughts
Whether you’re investing in US tech stocks, European ETFs, or Asian small caps, understanding market data is critical for investors. It provides significant insights into what is happening in the market, which help to inform investing decisions.
You can access market data from many financial websites and online brokers. The general rule is that the closer to real time, and the greater the insight into market dynamics, the greater the cost.
To learn more about market data for the equities markets, visit the eToro Academy.
Quiz
FAQs
- What’s the difference between Top of Book and Depth of Book market data?
-
Top of Book shows only the best available bid and ask prices, which is what you see on most basic trading platforms. Depth of Book includes multiple levels of bids and asks, offering more insights into the liquidity and trading interest at various price points.
- Why do bid/ask spreads vary between different stocks?
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The bid/ask spread depends on the stock’s liquidity and trading volume. Large, frequently traded stocks (like Apple or Microsoft) tend to have tight spreads, while smaller or less active stocks may have wider spreads due to fewer buyers and sellers.
- Can I see how much of a stock is being traded globally?
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Yes. Consolidated volume reflects the total number of shares traded for a stock across all venues in a given market (e.g., all US exchanges). Many global exchanges also offer market-wide statistics that show volume and turnover for individual stocks and sectors.
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