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What Is Order Book and How to Use It in Crypto Trading?

The order you place to buy and sell cryptocurrency is sent to the order book of the exchange. An order book is where buyers meet sellers. Buyers buy the pending orders of sellers. An order book is dynamic so it is constantly updated in real-time. 

An order book in the Trade page of CEX.IO consists of three components: buy orders, sell orders, and trading history.

Buy orders include all bids, each of which consists of a price and a quantity that the buyer wishes to purchase. 

On the other hand, sell orders include information about the asking price and the amount to sell.

Trade history shows all past transactions in the order book, which is located at the bottom of the Trade page. 

Order books are located towards the bottom of the CEX.IO Trade page, right below the Market Depth chart. There are two tables: Buy Orders and Sell Orders

Buy orders

Buy orders in the exchange are ranked by descending prices, so the highest bidding price is always located at the top of the buy order book. 

If the highest bidding price in the buy order book is matched by the cheapest sell price in the Sell Order book at any given time, then transactions get executed at that identical price until either of the available listed buying or selling amount dries up.  

Sell orders

Sell orders in the exchange are ranked by ascending prices, so the cheapest sell price is always located at the top of the sell order book. 

If the cheapest sell price in the sell order book is matched by the highest bidding price in the Buy Order book at any given time, then transactions get executed at that identical price until either of the available listed buying or selling amount dries up.  

In that shell, as long as you place a buy order that is not cheaper than the current lowest sell price in the Sell Orders book, your order will be the first to be filled. And likewise, if you place a sell order that is no higher than the current highest bid price in the Buy Orders book, your order will again be the first to be executed.

The order book shows potential imbalances between the pending buy and sell orders, which can provide clues in what direction the price may move in the short term. For example, if the number and amount of buy orders are significantly more than those of sell orders, it may hint at significant buying pressure which could push the price upwards. 

Traders can also use the order book to identify potential support and resistance levels. A big cluster of buy orders at a specific price may suggest a support level, while a big chunk of sell orders at a specific price can be considered as a resistance area.

Tip:

Order books are always dynamic, which means orders at each price level may be removed or changed at any time. Due to this, it may not be a good idea to make trading decisions solely based on the state of order books.

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