If you are new to trading, you may find it difficult to comprehend how an order book works. However, it is not as difficult as it appears at first glance. When trading crypto, there are only two major factors to consider: price movement and volume flow. An order book, in this regard, provides essential information about these two factors of crypto trading.
An order book is a tool that traders use to see the current buying and selling prices. Order books contain various pieces of important details about a trade. For starters, there are separate sections for buyers and sellers. Following that is a bid and ask section. In this case, “asks” represent a sell order, while “bids” represent a buy order.
Order books are also public records that show the current market price of a cryptocurrency. They provide traders with information about the market’s direction and how much of a particular coin is currently being traded at any given time.
Limit orders and market orders make up an order book. A limit orders is used by traders who want to buy or sell at a specific price, whereas a market order is used by traders who want to buy or sell immediately at the best available price. As trades occur, these orders move around the book and may be filled or canceled if they cannot be filled within a certain timeframe.
How Does the Order Book Work?
The key characteristics of a deal are mentioned when placing a trade order: the price at which a trader wishes to buy/sell the crypto and the number of coins. Just after the order is executed, the exchange starts looking for a counter order to fulfill the request.
The deal price is shown on the screen and recorded into the trading history after the trader’s order is executed. To put it another way, the more actions are taken in one direction (buy or sell), the more the asset price changes. More info regarding Phemex trading volumes can be found in the series of videos below. Typically, buy orders are highlighted in green, whereas sell orders are highlighted in red.
How To Read an Order Book
Reading an Order book is not as hard as it appears.
An Order book is used to place bids and asks at various prices, with a matching engine matching the orders of buyers and sellers on a continuous basis. The asset is deemed to be more liquid if there are more limit orders in a given price range.
It can contain a variety of information depending on the crypto exchange.
They usually consist of a Price, Amount, and Sum, where:
- Price is the price of an asset
- Amount is the volume of each individual order offered for this Price
- Sum is the total amount of crypto realized for this price.
An Order book doesn’t always display all of the orders that have been filled, but rather all of the open orders. That’s how they can be valuable in terms of indicating where traders believe the price is likely to move, how much money is trapped in an open order at specific price levels, and if there are any likely support and resistance levels.
Order Book Tutorial on Phemex
Phemex Order Book Overview:
Order Book PART 1:
Order Book PART 2:
Order Book PART 3:
Viewing the order book can also help you determine if the buy or sell order has this sort of strong movement. If the buy side’s order volume is much more than the sell side’s, especially at the bid/ask price level, it indicates that the buy-side has more momentum and that the Bitcoin (BTC) price is likely to rise.
Similarly, a much bigger order quantity on the sell-side indicates more momentum on the sell-side. Of course, because the order book moves in real-time and even leaps drastically, you must keep a close eye on it to spot small price trends.
Order books are one of the most important trading tools because they show you whether or not you can execute your trade. If you want to buy or sell an asset but there isn’t enough interest at the right price in the order book, you may need to adjust your strategy or wait until there is enough interest (buyers or sellers) in the market before executing your trade.
Most major crypto exchanges include order books that include buyers in the green wall, also known as “bids,” and sellers in the red wall, often known as “asks.”
Order books, in general, provide information about the amount of money locked in a list of orders, the coin’s liquidity, and potential support and resistance levels. They provide you with the same type of information in general, but some may provide you with additional information and hence a better grasp of what’s going on in the market.
Overall, the order book allows a trader to make better-informed judgment calls on the buy and sell demand in a specific cryptocurrency. So, if you’re interested to start trading, don’t worry. I’ve got that all covered. Just click on this button below for more info: