If you are an online trader in equities and F&O, you will surely be familiar with terms like the order book and the trade book. To make the best of your online trading facility it is essential to understand the nuances of the order book and the trade book thoroughly. As the name suggests, the order book records the orders placed and the trade book records the actual trades executed. Let us look at the concept of order book vs trade book in online trading. We will also understand the difference between order book and trade book and look at some order book trading strategies. Here is what you need to grasp about the order book and the trade book.
What you need to know about the Order Book
When an order is placed in equity or in F&O, the details of the order along with the quantity and the price immediately reflects in the order book. There is also a unique order number with which that order is tagged for future reference.
If an order is placed as a market order, then it normally gets executed immediately. Then it shows in the order book as an executed order. However, in case of limit orders, the order will only be executed if the price conditions are met. In that case, the order is shown as either open or executed as the case may be.
As a trader in equities or in F&O, you have the facility of modifying the order till the time the order is not executed. If the order has been placed but not yet executed, then you are permitted to make a variety of changes to the order. For example, you can convert a market order into a limit order and vice versa. Alternatively, you can also modify the quantity and price at which you want the order executed. Remember, all these modifications can only be made till the time the order is actually executed.
The order book allows you to sort the order on the basis of the exchange or the segment. For example, you can filter only the orders on the NSE or the BSE or purely SOR orders. Alternatively, you can filter the orders based on equities, futures or options as the case may be.
Finally, the order book can also be sorted based on the status of the order. For example, orders can be fully executed, partially executed, rejected, modified, cancelled etc. You can sort on any of these status conditions. 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 expired orders.
What you need to know about your Trade Book?
When an order is actually executed on the exchange within the stipulated conditions, the actual execution status along with the trade number gets reflected in the Trade Book in your online account. This applies to your equity trading, futures trading and also to your options trading.
Normally, when market orders are placed, they are immediately executed so it gets reflected in the trade book as soon as the order is entered in the order book. In case of limit orders, the order may either be unexecuted or partially executed. In case of partial execution, the trade book only reflects the extent to which the order has been actually executed.
Like in case of the order book, the Trade Book can also be sorted based on the exchange, the trading segment and even based on the instrument traded. Of course, you can also select the ALL option which allows you to look at the entire universe of orders executed. Both the order book and trade book are reflected only for that particular trading day.
Apart from having a record of your trades for the day, the Trade Book also offers you the seamless (Call to Action) from the trade book itself. For example, if you have bought a stock and the stock has gone up then you have a variety of options like closing the trade, adding more to the trade or doing a SIP online on the stock from the trade book itself.
As a prudent investor, the order book and the trade book are also very important sources of information for your own audit trail and for keeping a log of your trade performance. It is always advisable to cross check your order book and the trade book with the contract notes that you get on the evening of the trade. Above all, use the order book and trade book as a sounding board for you. If you order / trade ratio is too high, you need to rethink the way you are placing orders. That is the takeaway!