Crypto Trading 101: How to Read an Exchange Order Book

It takes two to tango in the world of crypto trading, where a dynamic relationship between buyers and sellers is always on display in something called an order book.

A tool that visualizes a real-time list of outstanding orders for a particular asset, order books represent the interests of buyers and sellers, offering a window into supply and demand.

But while all order books serve the same purpose, their appearance can differ slightly among exchanges. That said, they are all built with the same features and functions.

Examples from Coinbase Pro, Binance, Bitfinex and Kraken are shown below:

Crypto Trading 101: How to Read an Exchange Order Book final e1532703473121

To become comfortable reading order books, it is essential to understand four main concepts: bid, ask, amount and price. This information is displayed on two sides of the order book known as the buy-side and sell-side.

For the purposes of this explanation, we will be using the BTC/USD order book from one of the world’s largest cryptocurrency exchanges, Bitfinex.

Price and Amount

Although the two sides display opposing information, the concepts of amount (also referred to as size) and price are relevant to both. Simply put, the amount and price per order display the total units of the cryptocurrency looking to be traded and at what price each unit is valued.

In the example below there is an open buy order in the amount of 20.24 at a price of $8218.50.

Crypto Trading 101: How to Read an Exchange Order Book orderbook new copy e1532630456792

This means the entity who opened this order would like to purchase 20.24 units of bitcoin at a price of $8,218.50 per unit.

In the Bitfinex order book, you will also see the terms “count” and “total.”

The count refers to how many orders are combined at this price level to create the amount, whereas the total is simply a running total of the combined amounts.

The Buy Side

The buy side…

Source: https://www.ccn.com/

HashFlare
Categories: Ripple

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