The order book is like a list of bids for buying and selling cryptocurrency that is right on the exchange. It helps to understand who wants to buy something, who wants to sell something, and at what prices.
How is the order book structured?
It's simple:
1. Buy orders (bids): These are people who want to buy crypto. They write how much they are willing to pay. For example, "I will buy 1 BTC for $97,000."
2. Sell orders (asks): These are those who want to sell. They specify how much they are willing to sell for. For example, "I will sell 1 BRC for $98,000."
How does the order book work?
The order book works automatically, like a cashier in a store. It compares the bids of buyers and sellers:
- If someone agrees to buy at the price the seller offers, the transaction happens instantly.
- If the price does not match, the order remains in the list until someone accepts it.
A simple example
You want to buy BTC for $97,000, and someone is ready to sell it for that same amount. The exchange automatically "matches" you, and the deal goes through. If you offer only $96,000, the bid will go into the order book and will wait until the seller agrees.
Why look at the order book?
1. Understand the market. You can see where there are more bids: for buying or selling. This helps to understand people's mood — do they want to buy or get rid of crypto?
2. See support and resistance levels. If there are a lot of buy orders at a certain price, the price is unlikely to drop below that quickly.
3. Plan trades. You can choose where it is more profitable to buy or sell.
The order book is like a live queue of buyers and sellers. By understanding how it works, you can navigate the market better, make informed decisions, and not act blindly. It is one of the main tools for a trader, even if you are just starting out!
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