If you exchanged traditional futures markets like ES or NQ, you may have noticed that you can only see some level of book order and often pay a significant amount to access the entire depth.
Even worse, products such as Spot Forex and other CFDs do not offer a visible order book because they have been exchanged with the counter (OTC).
However, when it comes to crypto, things are different.
One of the main advantages of trading cryptocurrency derivatives is data transparency; Seeing the full market depth for all products is standard.
As it could be of benefit to this data, many merchants were scared of clusters of numbers that popped on the screen. Although they manage to understand how to read the order book, they are more often than not to fall for spoofing and end with the full incorrect side of the trade.
In this article, you will know everything you need to know about ordering books, how to read them, what websites to use and how to use them in your trading.
What is the order book
The order book, sometimes called market depth or DOM, shows us rest limit orders.
The limitations of the orders are also called passive orderflow, liquidity, or manufacturer's orders.
The image above shows us a spot order book for BTCUSDT and ethusdt on Woo.
The numbers inside the bid column with a blue background show us bids ready to buy, and the numbers inside the Question column with a red background show us asking (also called offers) ready to sell.
You may also be familiar with the heatmaps, which exactly the same as the order order but that has been visualized directly on a chart with different colors based on order intensity.
As someone who originally came to crypto trading from a background in the Heritage market, I always looked at the book order information that applies only to super low hours of time and as noise due to a large amount of spoofing.
For those of you who do not know, spoofing means placing orders in order book without the desire to be filled with them; This happens to confuse other market participants.
What I realize is that things are a bit different from the cryptocurrency space, and ordering books are often used even in higher timeframes. Large market participants often do not care to see their orders, perhaps because the “average crypto entrepreneur” does not care about this information.
As you can see in the image below, the big bid is left in Solana for hours before filling out, creating a strong intra-day bounce.
Later, I will show you the easy way you can verify whether the order is actually filled or not.
Spot vs futures order book
When it comes to trading cryptocurrencies, you have two options: you can also trade derivatives (forever futures), or you can trade a place.
The differences are straightforward: if you exchanged a place, you can only buy to own the underlying owner and sell it back to cash (stablecoins); In derivates, you can imagine price movements that go both long and short and use action.
Futures are the “retail entrepreneur” choice.
If you think Bitcoin is about to move from $ 60,000 to $ 65,000 and you would like to buy 1 BTC to make $ 5,000 if the move happens, you will need to have $ 60,000 in exchange to buy 1 BTC.
For futures, it will be cheaper as you can use the action, and your margin requirements will be lower.
Although futures ordering books can provide useful information, the limit book on futures is often surrounded by market makers who provide liquidity rather than try to express any bias of direction.
In the spot order book, we saw large players with sufficient capital to influence price movements.
The two examples above show the BTCUSDT spot order book (top) and BTCUSDT Perpetual Futures order book (bottom).
The chart is also -filter to display large outstanding orders.
You will quickly notice that in the place's book order, large orders appear only in areas of decent price -to -price points compared to the Futures Order Book, which is filled with large orders on both sides above and below the price throughout the time.
This is a classic example of what the market is like (providing liquidity).
With the order book as an indicator of supply and demand
While examining individual price points in the order book because support and resistance levels can be useful -use, single orders often do not provide a complete picture and may be misleading.
You will use order books better once you look at Delta's imbalance within the order book.
For those of you who have no idea what Delta's imbalance is, this is just a difference between the limitations that are available to buy and the limitations that are available to sell.
If you have an order book with 100 BTC resting on the bid side (to buy) and 70 BTC resting on the questions (sell), the delta in this case is 30 (100-70).
Below, you will see the example from the actual order book.
You can see that, in this case, the order book is more or less balanced, with a negative Delta of 3.1BTC (approximately $ 150,000).
Fortunately, we do not need to look at the ongoing order book change and try to calculate the difference in ourselves; Many platforms will do this for us and plan the Delta order order depth as an oscillator.
Tradinglite, Mobchartand the trdr.io are some who can show depth of order order.
I have nothing to do with any of these (besides using a sneaky reff link shill in the URLs in the previous sentence), but all of them are great and have features.
Since you will need a premium subscription to access book depth data, I recommend Trdr.io because they are the only platform with combined -the depth of the book order, even though MobBchart has the largest selection of coins and Tradinglite has the most general features.
I complete the rundown of platforms and settings at the end of the article.
As I mentioned, we do not care about specific price levels but rather the significant difference in the delta between buyers and sellers when using a book order depth.
The picture above shows price reactions to BTC once the Delta order order goes above or below $ 50m; As you can see, whenever there is a bid demand or supply, the price follows in the direction.
This example is just from the last two weeks of bitcoin price action, but as I mentioned before, the book order depth can also be used in higher timeframes.
Below, you will see BTC in a sunny timeframe and price reactions when the Delta order book is above or below $ 150m with a depth smaller than 10% from market price.
Compared to traditional indicators such as the RSI, which clearly sets boundaries for “Overbought/Oversold” areas, the depth of the book order only shows the current delta. What you see as high or low is your decision -making.
As such, it is worth spending time backtesting past price reactions in different markets.
Improvement in implementation using the Depth of Order Book
The depth of the book order is not a classic indicator; It will not tell you when to buy or sell.
It only tells you what if the merchants of the area (often heavier hands) are interested in buying or selling.
Spot merchants are also often more patients than futures trading; As such, books in the area can be heavy to sink to one side longer before the meaning of the uprising.
As you can see in the chart above, Sol Order books are heavy on the seller's side, but Solana still rallies 7% higher before the latter sells.
It is best to think about using a depth of book order more as a confluence indicator within your system, which will help you stay on the same side of large market participants and give you a higher trust in your trade.
On my Twitter, I recently created a full trading breakdown, using the depth of the book order as a cluster for my over -the -trace idea; You can find the whole thread here.
Book order depth platforms
To view the depth of the book order, you need to use a specific platform.
There are some, but I will list the three that I have found the most benefit for a variety of reasons.
I have no association with any of these platforms, and they may come with additional monthly subscriptions.
Trdr.io
This is my personal favorite because it offers a variety of settings and, most importantly, combined -with data from many exchanges; Therefore, you will get a whole picture of what is happening.
The little disadvantage of Trdr.io is a bit slow to list any new coins therefore you may not find favorite altcoins there.
When it comes to settings, you want to make sure that market types are scheduled to see and the smaller than the setting is 1% or 2.5% for Day Trading/Scalping, 5% for intra-Week swings, and 10% for higher timeframe swing trading.
Mobchart
Mobchart is great too. They have no combined feeds, because they only offer Binance and Bybit, but different coins and a screener with more wid will display large limitations of limitations in all markets.
Coinglass
Coinglass is the only one that is free and a good starting point if you don't want to pay for any subscriptions.
They also have a combined feed, but unfortunately, the indicator will only show you the nearest 1% from the market price; Therefore, it will only be useful for very fast scalping.
Conclusion
Using a depth of order order in your trade is a great tool to obtain additional confluence for any trading system emerging with the use of price action or indicators.
Obviously, nothing works every time, but it is usually useful to be on the same side of the market as the merchants of the area.
