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Crypto Trading 101: How to Read an Exchange Order Book – CoinDesk

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10:25 AM

It takes two to tango in the world of crypto trading, where a dynamic relationship between buyers and sellers is always on display in something called an order book

In the example above, we can see a large order of 500.2 BTC units waiting to be filled with a bid of $6,263.

Since the order is rather large (high demand) compared to what is being offered (low supply), the orders at a lower bid cannot be filled until this order is satisfied – creating a buy wall.

In this case, the buy wall is helping the $6,263 price level of bitcoin act as short-term support.

The Sell Side

Conversely, the sell side contains all open sell orders below the last traded price.

This price is known as the “ask.” It states, “I am asking someone to buy X units I own at a certain price.”

The opposite of a buy wall is formed when there is an abundance of sell orders (supply) at a specific price level, known as a sell wall. If there is a very large sell order unlikely to be filled due to lack of demand at the specified price level, then sell orders at a higher price cannot be executed – therefore making the price level of the wall a short-term resistance.

Conclusion

All in all, the order book gives a trader an opportunity to make more informed decisions based on the buy and sell interest of a particular cryptocurrency.

Essentially, it provides a “behind the scenes” view into live-action supply and demand which may reveal order imbalances, market manipulation and support/resistance zones – all of which can be used to a savvy trader’s advantage.

Disclosure: The author holds BTC, AST, REQ, OMG, FUEL, 1st, and AMP at the time of writing.

Text on page image via myBTCcoin; Charts by Trading View

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