Crypto Trading 101: How to Read an Exchange Order Book
There are two things in the world of password trading where a dynamic relationship between a buyer and a seller is always displayed in a place called an order book.
Orders, a tool for visualizing a real-time inventory of outstanding orders for a particular asset, provide supply and demand windows on behalf of buyer and seller interests.
However, while all order books are used for the same purpose, the appearance may vary slightly between exchanges. In other words, they are all built with the same features and functionality.
Examples of Coinbase Pro, Binance, Bitfinex, and Kraken are:
To make reading easier, you need to understand four key concepts: bidding, asking, amount, and price. This information is displayed on both sides of the order, known to both the buyer and the seller.
For the purposes of this discussion, we will use the BTC / USD order form from Bitfinex, one of the largest password exchange transactions in the world.
Price and amount
Even though both sides show the opposite information, both the concept of quantity (also called size) and the price are related. Simply stated, the amount and price per order shows the total unit of cryptocurrency to be traded and the price at which each unit is valued.
In the example below, there is a public purchase order for $ 20.24 and $ 8218.50.
This means that a company that makes this order wants to buy a 20.24 bit coin at a price of $ 8,218.50 per unit.
You can also see the terms "calculation" and "total" in the Bitfinex order.
A grand total is a cumulative total of the combined amounts, while a grand total represents how many orders are combined at this price level to generate an amount.
The purchase side represents all open purchase orders above the last transaction price.
This offer from the buyer is called & # 39; bid. & # 39; It effectively expresses the merchant's interest, such as "I am bidding on an X unit that you own at the specific price you want to buy."
If the bid matches the appropriate sell order, you can facilitate the transaction.
When a purchase order (demand) at a certain price level is abundant, what is known as a purchase wall is formed.
Wall purchasing affects asset prices because you can not buy orders at lower prices if you can not fill a large order. Since orders under the wall can not be executed until large orders have been completed, prices can no longer decline and the walls serve as short-term support levels.
In the example above, BTC 500.2 orders are waiting to be filled with a bid of $ 6,263.
You will not be able to fill orders with low bids until your order is satisfactory because your order volume is high (due to high demand) compared to the products offered (high order volume). Create a purchase wall.
In this case, the purchase wall will help short-term support of the $ 6,263 bit coin price level.
Conversely, the seller will include all sell orders below the last transaction price.
This price is called "ask." It says, "I want someone to buy an X unit that they own at a certain price."
The opposite of the purchase wall is formed when the sales order (supply) at a certain price level known as the sales wall is abundant. If you have very large sales orders that are not likely to be filled due to insufficient demand at the specified price level, you will not be able to execute high-priced sales orders, thus making the wall's price level a short-term resistance.
Ordinarily, the purchase order gives the buyer the opportunity to make informed decisions based on the purchase and sale of a particular cryptocurrency.
Essentially, it provides a "hidden background" view of realistic supplies and demand that can reveal order imbalance, market manipulation and support / resistance areas, all of which can be used to the advantage of savvy traders.
Disclosure: I have written in BTC, AST, REQ, OMG, FUEL, 1st, AMP.
Text of the page image via Shutterstock; Charts by Trading View
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