Order Books
If you’ve ever wondered how trades actually work behind the scenes, you’re about to uncover one of the most important pieces of trading: the order book.
Understanding how order books work can give you an edge, helping you spot support and resistance levels, assess market depth, and make smarter decisions when placing trades.
What’s an Order Book?
Think of an order book as a scoreboard. It’s a live list of all current buy and sell orders for a given trading pair — like BTC/USDT or ETH/BTC. Buyers post the price they’re willing to pay (bids), and sellers list the price they want to get (asks).
This board is constantly changing, especially in high-volume markets. New orders come in, others get filled, and some disappear as traders adjust their strategies.
Each entry on the order book shows:
The price someone is willing to buy or sell
The amount of the asset they want to trade
This raw information forms the foundation of all price action on an exchange.
Anatomy of an Order Book
To break it down:
Bids (Buy Orders): These sit on one side of the book, showing how much buyers are willing to pay. They’re usually arranged from highest to lowest.
Asks (Sell Orders): On the opposite side, you’ll see what sellers want in return. These are sorted from lowest to highest.
Spread: The difference between the highest bid and the lowest ask. A tight spread usually means high liquidity; a wide spread can signal a thin market.
Order Size: Each line in the book also shows how many units are being bought or sold at each price level.
When a buy and sell order match, a trade is executed, and those orders are removed from the book. The process is fast and constant.
Depth Charts
To make it easier to read at a glance, many platforms offer a depth chart, a graphical representation of all open bids and asks.
The x-axis shows prices.
The y-axis shows total volume at each price point.
Buy orders usually appear in green, sell orders in red. Large spikes can indicate “walls” — clusters of orders that can act as temporary support or resistance levels.
But take these walls with a grain of salt. Traders can place and cancel large orders just to influence perception (a strategy known as spoofing).
How Traders Use Order Books
Reading an order book isn’t just about watching numbers move, it can give you real insight into market behavior:
Spotting Key Levels: A giant wall of buy orders can suggest support, while a fat cluster of sell orders may hint at resistance.
Analyzing Liquidity: Thick order books make for smoother trading. You’re less likely to experience slippage when entering or exiting a position.
Tracking Momentum: Sudden shifts in bid or ask volumes can show whether bulls or bears are gaining strength.
Keep in mind: the order book is only a part of the puzzle. Use it alongside price action, technical indicators, and context from broader market trends.
Types of Orders You’ll See
Different types of orders interact with the book in different ways:
Market Orders: These get filled immediately at the best available price. They “eat” into the book.
Limit Orders: You set your price, and the order stays on the book until someone matches it.
Stop Orders: These trigger when price hits a certain level. They’re often used for risk management.
Final Thoughts
Order books are a window into the battleground between buyers and sellers. Whether you’re a casual trader or a full degen, understanding how to read them gives you an extra edge in the markets.
Just don’t fall into the trap of relying on them alone. Add some extra layers to your strategy to get more confirmation on market trends.
Kuma is a double-down bet on what works for decentralized trading: speed, security, and transparency. From the team behind the No.1 DEX from 2017-2019, and powered by Berachain’s Proof-of-Liquidity, Kuma delivers one-click onboarding, seamless mobile trading via Kuma Connect, and gas-free settlement. Traders of all sizes have an edge thanks to millisecond execution and complete control of their funds.
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