Crypto Trading Order Book Analysis (Part 1)
Crypto trading can be said as all about strategy. Whether you’re a day trader chasing short-term profits or a long-term holder aiming to ride the waves of market cycles, understanding the market’s inner workings is essential. The more the analysis you can make the more you can mitigate risk in crypto trading. Most powerful tools is the order book. If you’ve ever peeked behind the scenes of a crypto exchange, you’ve probably seen the long list of buy and sell orders stacking up in real time.
That’s the order book, and while it might seem intimidating at first, it’s a treasure trove of information. In its simplest form, an order book is a real-time list of the entire buy and sells orders placed on a trading platform. Think of it as a matchmaking service, where people who want to buy a crypto (buyers) and people who want to sell it (sellers) get matched up. Once matched, the trade is executed.
There are two sides to an order book like Bid order and Ask order. Bid (Buy)is an offer made by people who want to purchase a certain crypto. The prices they’re willing to pay are listed, and they’re ranked from the highest to the lowest.Ask (Sell) Orders is opposite to that. These are offers made by people who want to sell their crypto. The prices they want are listed from the lowest to the highest.The difference between the highest bid price and the lowest ask price is known as the spread. A smaller spread usually indicates a more liquid market. When the market is highly liquid that means it’s easier to trade because there are plenty of buyers and sellers. And for low liquidity, it is the opposite.
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