What is an Order Book?

Trading platforms are the epicenter of cryptocurrency trading, which make different tools available to you, one of them being order books. Let's learn a little more about these, their functionality and their importance for traders and users of these platforms.

El order book u order book by its name in English, it is one of the main elements to consider during our experience on an exchange. An order book reflects all wishes for buying and selling of a certain asset of the exchange.

Each of these wishes have been expressed through an order, in which the conditions have been stipulated so that it can be executed. For example: I want to exchange a unit of asset X at price Y, and I want Z quantity.

On the other hand, the exchanges of cryptocurrencies, it has an order book for each of the crypto assets they support. In this way, they allow users and traders to have access to a specific order book for each cryptocurrency. This is a situation that greatly improves the user experience. It also makes the work of technical analysis.

At this point, there is no doubt that Order books are a fundamental part of the experience of using an exchange. That is why understanding its elements, how to use it correctly and its importance, are vital to get the most out of the actions we carry out as traders.

Elements that make up an order book

A book of orders is made up of a series of elements among which we can highlight:

1. Purchase orders or Bid (Offer). This is a section of the order book where we can find all purchase orders made by traders. It represents the value of the order given by the buyers, at limit prices, and ordered from the most expensive to the least expensive.
2. Sales orders or Ask. In this section we find sales orders made by traders. These are organized from the lowest value to the highest price.
3. Orders history. This order history refers to the purchase-sale orders that we have made on the platform.

These three elements are what make up the most important or primary part of the order book. But in addition to these, we can also find the following complementary elements:

1. Spread. The spread refers to the difference that is created between the price of the highest desire to buy and that of the lowest desire to sell.
2. Quantity. This is another piece of information that we usually see on exchange platforms. It reflects the total amount of coins for sale or purchase that are within the order book, and even at a certain price.
3. Price. This data represents the cost for which the order is charged, where few or many may coincide in the pricing.
4. Sum. This is an element of the order books that is responsible for making the trader see the accumulation of orders that exist at a certain price.

Additionally, the information in the order books is organized in columns, which show all this data. In addition, these orders can disappear because they are cancellable, or appear suddenly if it is allowed to put them invisibly. Of course, each platform has its own peculiarity, but the basic elements remain the same.

Importance of order books

Order books can provide highly relevant information to traders. First, a command book helps to understand supply pressure versus demand pressure on a currency pair. This is achieved because it allows you to see if there are many people wanting to buy or sell at a certain price. With this information, a trader can adjust his buying and selling strategy at a level that allows him to obtain benefits.

Additionally, Order books help maintain a high level of transparency on the exchange. This is because they provide relevant information on price, availability, depth and who initiates transactions. Although this last point can be skipped by anonymous users. Something that can be especially influential in the market, since generally these users have at their disposal large amounts of cryptocurrencies (users called whales / whales). In this way, their way of acting can strongly influence the exchanges and the prices of that platform.

Features of an order book

Among the main characteristics of an order book we can mention:

1. It offers a quick visualization of market prices both for sale and purchase. It allows to know the liquidity and depth of a market, observing the quantity and volume of purchase / sales orders, as well as its update frequency.
2. It is a tool that It allows to visualize in an organized way the flow of sales and purchases of cryptocurrencies.
3. Offers a rquick display of market prices for both purchase and sale. In this way, the trader has information at his disposal to give the best value in the operation he wishes to carry out.
4. It allows to detect resistance observing large amounts of purchase / sale at a certain price, generating a noticeable difference with other prices.