2025-07-03

Order Book

An order book is a live list of buy and sell orders for a crypto asset, showing price levels, quantities, and market depth, essential for understanding liquidity and price pressure.

What Is an Order Book?

An order book is a real-time ledger that lists all pending buy (bid) and pending sell (ask) orders for a cryptocurrency on an exchange. It shows:

  • Price levels at which orders are placed
  • Quantities available at each level
  • Market depth, indicating how much volume exists at different price ranges

Order books are available on centralized exchanges (CEXs) like Binance, Coinbase, and Kraken. They offer vital insights into market structure, liquidity, supply-demand balance, and potential price moves.

Why Order Books Matter

  • Helps estimate price impact of large trades
  • Reveals support and resistance zones through concentration of orders
  • Exposes buy-side or sell-side dominance
  • Guides trade execution strategy, such as when to use market vs limit orders

How to Read an Order Book

Bid and Ask Columns
  • Bids: buy orders arranged from highest to lowest price
  • Asks: sell orders arranged from lowest to highest price
Price Gaps and Depth
  • Identify thick order zones for potential support/resistance
  • Shallow depth indicates low liquidity; deeper depth increases trade confidence
Order Book Imbalance
  • More bids than asks may indicate bullish sentiment
  • More asks than bids may reflect bearish pressure
Spoofing and Fake Walls
  • Fake large orders may be placed to influence price
  • Watch if walls disappear quickly, this is a suspicious tactic

Example: Using Order Book in a Trade

A trader planning to buy 100 BTC notices a large wall of bids at $29,500. They use this wall to predict support and decide to place a limit buy at $29,480. After buying, they see orders clearing above and price slowly tick up, suggesting the buy wall is holding.

Order Book-Based Strategies

  • Iceberg Orders: Large orders split into smaller blocks to avoid detection
  • Layering: Creating multiple small limit orders to mimic normal activity
  • Volume Sweep: Market orders that “sweep” bids or asks, potentially triggering a move
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FAQs

What is an order book?

An order book shows all active buy and sell orders, with quantities, on an exchange—giving insight into supply, demand, and liquidity.

How can I analyze book depth?

Look for clustered orders at specific prices. Thick layers suggest support or resistance, while thin depth shows vulnerability to large trades.

What’s an order book imbalance?

It occurs when either the buy side (bid) or sell side (ask) dominates, indicating potential market bias toward one direction.

What are bid and ask levels?

Bid levels show what buyers are willing to pay; ask levels show what sellers are offering. Their spread indicates liquidity tightness.

Can spoofing be spotted in the book?

Yes, fake orders that disappear quickly or shift around can signal spoofing and false support/resistance.

Should I use limit or market orders?

Choosing depends on your goal:

  • Limit orders offer control but may not fill

  • Market orders guarantee fill but may incur slippage

How does order book affect slippage?

Thin books mean one market order can move the price significantly, causing slippage. Deep books reduce this risk.

Are order books available on DeFi platforms?

Not usually. Most DEXs use liquidity pools, not order books; however, some hybrid models do support order books.

Can I trade based on order book hidden orders?

Yes, by analyzing price action near big walls, but be cautious of manipulation like fake walls.

Can I monitor book changes with Phalerta?

Yes. Set alerts for changes in order book depth, large order cancellations, or sudden bid/ask shifts.

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