How to Use the Order Book?
The order book helps traders analyze supply and demand in the market and find profitable entry and exit points for trades.
🔵 How to Read the Order Book?
— The upper part contains sell orders (ask) – traders who want to sell an asset.
— The lower part contains buy orders (bid) – traders who want to buy.
— The difference between the highest bid and the lowest ask is the spread. The smaller the spread, the more liquid the market.
How to Use the Order Book in Trading?
🔵 Finding Support and Resistance Levels
— If there are many large buy orders in the book, this forms a support level, and the price may bounce from it.
— If there are many large sell orders, this forms a resistance level, and the price may struggle to break through.
🔵 Analyzing Liquidity
— The more orders in the book, the easier it is to buy or sell an asset without a significant price change.
— If liquidity is low, price fluctuations can be sharp.
🔵 Identifying Large Players (Whales)
— Large orders may indicate institutional investors' actions.
— Sometimes, "whales" place fake orders (spoofing) to manipulate prices.
🔵 Using in Scalping
— Intraday traders can use the order book for quick trades.
— A sudden increase in orders in one direction may signal an opportunity to enter a trade.