Cross-post. Original: stellarbytecapital.com/blog/order-book-market-microstructure
Most people building a trading system think in terms of one number: the price. But there is no single price — there's a bid, an ask, and a stack of resting orders in between. The moment you send an order you interact with that structure, not a clean number on a chart. Ignoring microstructure is why so many strategies that look profitable on close prices lose money live. Your strategy decides what to trade; microstructure decides what it costs.
The order book: what "the price" actually is
An exchange matches orders through a limit order book — two sorted queues:
Bids — buy orders, highest-first. The top bid is the most anyone will pay.
