An exchange will share what price a buyer is prepared to buy bitcoin at, and how much they want to buy at that price. This is described as a Bid.
Alongside the list of Bids, sorted by price, will be the Order Book of Sellers, providing the detail of sell Offers; the price and amount that Sellers are willing to exchange it. This is described as an Ask.
This information illustrates the push and pull impact on price of buyers and sellers. As soon as a Bid and an Ask are matched, a transaction takes place which establishes the price.
The following is an example screenshot of an order book for a Bitcoin/USD trading pair.
As a Trader you are trying to interpret what the Order Book is telling you about aggregate interest, is it unbalanced toward Selling or Buying?. Significant Bids at a specific price suggest support levels or conversely Asks might indicate a point at which price may struggle to surpass.
It is important to note that the Order Book represents Limit Orders, which are trades requested at specific prices for specific amounts. Bitcoin will also be traded through Market Orders, where the buyer or seller is happy to take the best available price at that point.
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