In the fast-paced world of digital trading, analyzing the order book
(Order Book Analysis) is considered a magic lens that reveals what happens behind the scenes.
Your understanding of supply and demand in the market gives you a strong competitive edge and helps you make smarter decisions.
In this article, we will take you on a simplified and focused journey to understand the order book, how to read it, and how to use it to analyze market dynamics professionally.
What is an Order Book?
The order book is an electronic record that displays open buy (Bids) and sell (Asks) orders for a specific cryptocurrency in real-time.
Includes:
Buy orders (Bids): Offers to buy the currency at a specified price and quantity.
Sell orders (Asks): Offers to sell the currency at a specified price and quantity.
Spread: The difference between the highest buying price and the lowest selling price, and is considered a measure of liquidity and cost.
This data is usually displayed in the form of a table or depth chart, where sell orders are arranged in descending order and buy orders in ascending order.
Basic components of the order book
1️⃣ Prices:
Buy orders are usually lower than the current price.
Sell orders are above the current price.
2️⃣ Volumes:
Shows the number of currencies available for sale or purchase at each specific price.
3️⃣ Market Depth:
It shows the cumulative volume of orders at each price level, often graphically represented.
4️⃣ Spread:
Narrow spread: Indicates a stable market with high liquidity.
Wide spread: Indicates high volatility or low liquidity.
How to read the depth chart?
Horizontal axis (X-axis): Displays price levels.
Vertical axis (Y-axis): Displays accumulated quantities.
The green line: Represents buy orders (Bids).
The red line: Represents sell orders (Asks).
The middle area: Represents the spread.
Important hints:
Sharp incline of the green line = Strong demand.
Sharp incline of the red line = Strong offer.
Walls:
Buy Wall: Strong support.
Sell Wall: Strong resistance.
How to use the order book in trading?
1. Identifying support and resistance levels
The presence of a Buy Wall indicates strong support.
The presence of a Sell Wall indicates potential resistance.
❗ Note: Beware of fake walls created by whales to manipulate.
2. Assessing liquidity
Large order depth = Executing large trades without significant price movement.
Weak order book = Sharp fluctuations when executing large orders.
3. Monitoring whale movements
The appearance or disappearance of large orders may indicate expected major movements.
4. Determining market direction
Control of buy orders = Buying pressure (Bullish).
Control of sell orders = Selling pressure (Bearish).
5. Predicting breakouts
Disappearance of Sell Wall at resistance = Signal of bullish breakout.
Disappearance of Buy Wall at support = Signal of potential decline.
Golden tips for analyzing the order book
Combine with other tools: Use technical analysis and news to enhance your decisions.
Watch for manipulation: Beware of tactics like 'Spoofing'.
Follow real-time changes: The order book is dynamic and constantly changing.
Use demo accounts: Don't try new strategies on a real account directly.
Understand market characteristics: High liquidity (like BTC/USDT) differs from smaller coins.
Summary
Analyzing the order book is not just an additional tool... but a secret weapon for every trader who wants to understand the pulse of the market and act confidently.
With training and practice, you can use this skill to read liquidity flow, detect large movements, and anticipate critical price changes.
Get ready to open your eyes to a deeper world beyond just candlestick movements!
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