In cryptocurrency trading, an order book is a real-time, continuously updated list of buy and sell orders for a particular cryptocurrency. It displays the prices and quantities of these orders, organised in a way that helps traders understand the current market demand and supply at different price levels.
The order book typically has two main sections: Bid (Buy) Orders and Ask (Sell) Orders.
- Bid (Buy) Orders: This section lists the prices and quantities that buyers are willing to pay for the cryptocurrency. The highest bid represents the maximum price buyers are willing to pay.
- Ask (Sell) Orders: This section lists the prices and quantities that sellers are asking for their cryptocurrency. The lowest ask represents the minimum price sellers are willing to accept.
Traders use the information from the order book to make informed decisions about when to buy or sell. For example, to identify key support and resistance levels or gauge the overall market sentiment. Additionally, the order book helps traders understand the liquidity at different price points, which can be crucial for predicting potential price movements.
