CLOB (Central Limit Order Book) Technical Details

1. Overview of CLOB Model

Full name: Central Limit Order Book
Analogy: "Big Ledger" of Stock/Cryptocurrency Exchange

Imagine the scene of a vegetable market:

• The vegetable seller hangs the price tag (sell order)
• The vegetable buyer shouts the buying price (buy order)
• The market administrator records on the big blackboard (order book)
• Automatically trade when the price matches

2. CLOB core components

1. Buy order queue (Bid)

• Sorting rules: Price from high to low
• Example:
  100 yuan × 5 lots (Lao Wang)
  99 yuan × 10 lots
  98 yuan × 20 lots

2. Sell order queue (Ask)

• Sorting rules: Price from low to high
• Example:
  101 yuan × 8 lots
  102 yuan × 15 lots
  103 yuan × 30 lots

3. Spread

• Calculation formula: Lowest selling price - Highest buying price
• Example: 101 yuan - 100 yuan = 1 yuan

3. CLOB workflow (details)

Scenario 1: Limit buy order

1. Lao Wang's order: Buy 5 lots at 100 yuan
2. System check:

• The current lowest selling price is 101 yuan (not matched)

1. Result:

• The order enters the buy order queue (the first position of 100 yuan)
• Order book update:
  Buy: 100 yuan × 5 lots (Lao Wang) → 99 yuan × 10 lots...
  Sell: 101 yuan × 8 lots → 102 yuan × 15 lots...

Scenario 2: Market sell order

1. Lao Zhang's order: Market sell 3 lots
2. System execution:

• Eat Lao Wang's 100 yuan buy order of 3 lots
• Remaining:
• Lao Wang's order: 100 yuan × 2 lots
• Transaction price: 100 yuan

1. Order book update:
   Buy: 100 yuan × 2 lots (Lao Wang) → 99 yuan × 10 lots...
   Sell: 101 yuan × 8 lots → 102 yuan × 15 lots...

Scenario 3: Large order impact

1. Institutional order: 99 yuan sell 20 lots
2. Matching process:

• First execute Lao Wang's 100 yuan × 2 lots
• Then execute 99 yuan × 10 lots
• The remaining 8 lots are placed in the 99 yuan sell order queue

1. Final transaction:

• 100 yuan × 2 lots
• 99 yuan × 10 lots

4. Three major advantages of CLOB

1. Price discovery function

• All buying and selling intentions are transparent and visible
• Example: Buying orders pile up at 100 yuan → important psychological barrier

2. Liquidity advantage

• Order book thickness determines liquidity
• Depth chart example:
  Buy depth: ███████ 30 lots
  Sell depth: ████ 15 lots

3. Fairness principle

• Price priority > Time priority
• Large orders cannot be queued

5. Practical application skills

Skill 1: Interpretation of market language

• A sudden increase in the first bid price leads to a large order → Possible main force support
• 444 consecutive sell orders → Institutional signal code

Tip 2: Iceberg order strategy

• Display 100 lots (actually 1000 lots)
• Avoid exposing the real trading intention

Tip 3: Sniping liquidity

1. Buy 1 price 500 lots
2. Hang 501 lots at the buy 2 price
3. When the buy 1 is eaten, it automatically becomes the new buy 1

VI. CLOB mode comparison

Comparison Items	CLOB	Market Maker Model	Auction Model
Transparency	High	Low	Medium
Liquidity	Depends on Participants	Provided by Market Makers	Centralized Release
Suitable Types	Mainstream Stocks/Coins	Small-Cap Stocks	Block Trades