What is an Order Book on the Cryptoexchange?
An order book is a serious and efficient tool that can be used to analyze the cryptocurrency situation. This is how it works.
Buying and selling
The order book is a visualization of bids and asks on the exchange. It provides you with in-depth information about the correlation and volume of cryptocurrency demand and supply in real time.
On SIGEN the blue part (green or other colors on other exchanges) of the order book shows Buy Orders. The red part shows Sell Orders. Consequently, the market price is most often between the best sell price and the best buy price.
Information in the order book reflects the depth and sentiment of the market and can be used to make pretty accurate forecasts regarding cryptocurrency price movement. The order book shows the biggest orders that can be used to make trading decisions.
Pricing
The order books allows you to simultaneously see two price categories: the topmost Buy Order reflects the highest price buyers are ready to pay for cryptocurrency while the topmost Sell Order reflects the lowest price sellers are ready to sell the asset for.
For instance, the price in the order book is fixed the following way: when cryptocurrency is sold at a favorable price, it’s replaced by another order with the ask price higher than in the previous order. Transactions follow one another, with each subsequent one more expensive than the previous one. With falling prices, the situation is similar, except that the buyer creates a low-price order and when this order “plays out”, another order is created, with an even lower price.
As a rule of thumb, picking the entrance point with the help of the order book works best for players who aim to hold their positions over some trading sessions.
Whatever purposes you are to use the order book for, you should do so carefully. Why? We’ll tell you in our next publication.