How to read orders on cryptocurrency exchanges

Reading the order book is a key component of the trading toolkit. Technical analysis deals exclusively with charts, but reading the order book is in the gray area between the basics and the technical aspects. The technique itself is more like technical analysis, intuitive, but given that it is not derived from a chart, the analytical gray area is where it will stay.

So, what is reading a book of orders? In short, this is the study and subsequent analysis of the book of orders for any market. The order book contains a list of all buy and sell orders that are currently placed on the market on a certain stock exchange, and it is this transparency that can be learned to use to your advantage. By studying the book of orders, we can often find clues about the plans of those who manipulate the price. This can add points of intersection with our technical goals for entrances and exits, as well as increase confidence in the validity of our positions.

But what is the process? Below is a general outline of what should be sought when studying a book of orders. There are three key components for reading a book of orders: order depthorder templates и time. This article will look at the first two of them.

Order depth

This is the simplest form of reading a book of orders based on studying the value of orders in the parts of buying and selling a book of orders.

  1. Choose any market on any exchange. Ideally, it is better to use exchanges that provide the most transparency in their order books, for example, Bittrex.
  2. Calculate the total value of orders in altcoin and bitcoin in the buy and sell parts of the order book. For example, Vertcoin on Bittrex has about 20 BTC buying orders for a total of about 28 VTC. He has in the part of selling orders for about 800 BTC for a total of about 000 VTC.
  3. At this stage, you need to calculate the average order size in both parts of the order book. Using the above values, the average buy order is XATUM satoshi. At the surface level, this does not make much sense, and we will return to this in a second. The average sales order, however, is Satoshi 69, which is about 9500% higher than current prices.
  4. Before proceeding further, it should be noted that from this point on one more superficial analysis can be carried out, based on the total cost of the parts of buying and selling in bitcoins: taking into account purchases on 20 BTC and sales on 9,5 BTC, obviously, there is more demand than supply. As already mentioned, this is a superficial level, and it does not take into account the manipulation of order books, which we will not discuss here.
  5. Returning to our average order values, why is the average order for buying Vertcoin so low compared to current prices? If you check the last pages of the order book, you will find that a buy order is worth 1,13 BTC by Satoshi 4 for a total of about 28 200 000 VTC. It explains everything. At your discretion, you can then remove this order from the calculations. This would give us about 600 000 VTC, remaining in the purchase part, a total of about 18,87 BTC, which corresponds to the average 3145 satoshi purchase order. A much clearer number.
  6. Now the calculation of the part of the sentence also comes with a caveat. Even though there are less than 10 BTC orders on the list, we can see that we are only shown 20 pages of data - in this case, the orders are about 11 Satoshi. Undoubtedly, there will be orders above this point, but this is a disadvantage of Bittrex; it only shows 000 pages of order book data for any of the parts. Many other exchanges offer full order book transparency.
  7. It should also be noted that these values ​​are dynamic, because order books are dynamic. Constant monitoring and study is needed to gain a more accurate understanding of the depth of the order.

Order templates

Templates are perhaps the most difficult aspect of reading order books, since they cover most of the manipulations that occur in the altcoin market. It is important to distinguish four types of such patterns: clean orders, bots orders, walls and, for lack of a better term, unclean orders, or dirty orders.

Net warrant

It is just a warrant that is extraordinarily perfect mathematically. Often these are orders consisting of numbers of multiples of 5 or 10 and appearing at regular intervals in the book of orders. For example, orders for the purchase of 50 000 Vertcoin by 5000 Satoshi, for a total of 2,5 BTC, with corresponding orders with an interval 1000 Satoshi. This indicates a significant price level for the market maker; possibly levels at which accumulation occurs. In terms of sales, you can find similar structures of net orders that will be set as future targets for price action. Again, this is simplistic and does not take into account the manipulation of order books, but it is obvious that this can be useful when searching for inputs and outputs.

Warrant bots

This is the one that challenges the abilities of a person in his performance. Often used algorithms for placing orders to buy or to sell. It is easy to notice, and you, probably, yourself met with this. Recall the time when you placed a buy order at the top of the order book, only to shift it within milliseconds to another buy order; This is a bot order. The purpose of these orders can be twofold: either get you to make irrational decisions (which we will discuss in the next section), or bring you to the active and immediate accumulation or distribution.

Walls

Many are familiar with the walls. The wall is an unusually large order in the order book. However, most tend to react in the most irrational way when it comes to such orders. Large buy orders being pushed and approaching current prices are often viewed by the masses as the perfect time to enter so as not to miss what should be an inevitable bull move. Large sell orders are seen as the ideal time to exit so as not to lose all the money when the market crashes and burns. This is order book manipulation at its finest. Buying walls is an attempt to get irrational market participants to buy up the order book, and the opposite is true with selling walls. This allows puppeteers to more profitably form prices for both accumulation and distribution purposes.

Unclean Orders

Much like pure orders, impure orders are about defining symmetry and patterns in the order book. However, they are more difficult to notice because, unlike their pure counterparts, they are composed of seemingly random numbers. For example, order 24879.284733 Vertcoin for 6435 Satoshi may appear in the order book. This order would seem strange to most, but perhaps you noticed another order for the same amount for 5733 Satoshi ... and another for 5210 Satoshi. Coincidence? Hardly. Unclean orders like these are simply a more subtle way for market manipulators to mark important levels for future reference.

Write down these various order patterns for yourself, because when you come across them, you will begin to distinguish the traces left by those who manipulate the price.

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