It's another week and am delighted to be your student this week @yousafharoonkhan.
This week lecture is on exchange order book which you have explained very well. I will be answering your questions one after the other. For cryptocurrency traders order book is forms an essential part of trading and you can set your preferred price to sell, if the price gets to your selected price it then execute the trade immediately.
What is meant by order book and how crypto order book differs from our local market
In simple terms an order book is referred to a book used by companies or individuals to record orders or demand for a particular goods that will be supplied not instantly but when the is turn of that order is reach with consideration on the price. For example I need to buy some trucks rice, I visit a company which sells rice and then demand for rice, the company knowing fully well they have other customers in queue will take my order, record it in the order book, stating the quantity I need and how much was paid on the demand, supplies of the rice can then be done once my turn is reached having considered my price.
Cryptocurrency order book is an electronic dynamic list of buy and sell orders, this book records the buyers and sellers trading interest, matches the order to to stipulated buyer or sellers price and fully or partially executes trades when it is due. The order book is able to provide instant market pricing to traders and these trades can be viewed by all traders all over the world.
Whereas the our local market usually keep a manual order book. It cannot be viewed by trader around the world like cryptocurrency order book. Most are hand-written and others are only visible to the companies keeping the order book. In our local market order book, prices are not stated like that of the cryptocurrency type. Our Local order book are quite slower to execute unlike the cryptocurrency whose order execution can be instant.
Explain how to find order book in any exchange through screenshot and also describe every step with text and also explain the words that are given below
First let's explain the following :
Pairs: Cryptocurrency pairs are used in comparison between two cryptocurrency, it aids in knowing the value of a token relative to the other. They can be traded for each other and it shows the currency or associated cryptocurrency it can be traded with,though it varies with exchanges. Assuming you need to buy BNB for instance, you should locate the currency it is pair with, on Binance BNB has more than 50 trading pairs like:
Support and Resistance: This are terms used in cryptocurrency to describe technicalities involved in trading cryptocurrency, usually used to describe price levels on charts which act as barriers that prevents the price of a fluctuating towards a certain direction.
Support is usually related with demand and occurs when there is an expected pause in downtrend due to concentration of demand. On the other hand, Resistance occurs when an uptrend is expected to halt temporarily due to a concentration of supply. They can be identified on the chart by lines and moving signals. Most traders based there trading on resistance and support with the hope that the these Zones cannot be broken.
Limit Order: This is the order to buy or sell cryptocurrency within a specified inputted price. In the limit order, the seller or buyer observes the market order prices and the knows what ranges to use. He then places the price of which is suitable to him but must be within the market price in other for the transaction be completed. This usually help traders control the market. Assuming I want to buy a token, I observe the market price and set my order limit within the ranges of the market price, once the price reaches that price the trade is executed and it moves to the next available trade.
Market order: The is an order to buy and sell cryptocurrency immediately at the prevailing market price. In this order, the trader can not determine the execution price, he could realised he bought at a new all time high. Traders must remember that with this order, they are not in control of the price.
Locating an order book on Binance can be done by either clicking on market
Or by clicking trades
It takes you directly to the order book where you can then select your preferred trading pairs.
Explain the important future of order book with the help of screenshot
Exchange order has some very exciting and easy futures that help to execute trade successfully namely:
Buy and sell order: it is usually called the buyers and seller side, it displays all order by other buyers which can clearly be seen, it also shows the quantity and value bid by other traders.
Bid and Ask: This is usually old fashioned but some exchanges uses what we call Bid and Ask. This refers to a trader's bargaining price. The buyers do the bidding and sellers do the asking, all for a specific price.
Open order: An open order shows your personal order successfully placed waiting for the price and a successful execution.
Price: Prices are recorded for both the buyer and the seller side. This prices shows your how much they are bidding and asking, giving you the trader a fair idea of how much you can also bid.
Limits: This area gives the trader the ability to set limits on his intended trade. He could either put it to be higher than the market price.
Total: This displays the total amount of the you would be charged on the preferred order and on the preferred price as well.
How to place Buy and Sell orders in Stop-limit trade and OCO
Starting with a screenshot of my Binance wallet
First we need to locate the market place, select your preferred trading pair and click buy or sell. When using stop limit trade, we could break down to the stop and limit price respectively. The stop price pushes on the limit price, while the limit price is the price that was triggered. This simply means that in using the stop limit trade, once the stop price is reached, the limit price will be placed in the order book for executions.
For example, assuming I bought 5000 BTT @ 0.0024USDT and am very that the price may likely increase especially after this last BTC price correction exercise, I will then set my stop price to be slightly lower than abit higher than my purchase price (in order not to I cure loses) let's say at 0.0023USDT and set my limit price to let's say about 0.004USDT (incase it gets there), once the limit price get to my preferred rate the stop limit triggers the limit price and places the order for execution. Also when the stop price goes below the requires rate, the stop order is also triggered and the order to sell is also place.
For One Cancels the Order (OCO) trading, two orders can be placed at the same time, a limit and a stop order but only one can be executed at a time. Once on of the order is successfully filed the other is canceled and execution proceeds. In placing an OCO order, the stop price should be higher than the market price and the limit order should be lower than the market price, all this at the same time. Once one of this order is confirmed the other is cancelled.
For example, let say I want to sell my 5000 BTT, if the market price is 0.0033USDT, I will set my stop limit to may be 0.0032 and my limit order to 0.012at the same time, if my prediction is correct @0.0015 and the price reaches my projected price, the order is filed for execution and the other order is cancelled but the order in limit order @0.009 the limit order is filed in for executions and the stop order is cancelled.
How order book help in trading to gain profit and protect from loss
The order book if properly understood could be of great benefit to traders. First the order book keeps track of all trading on the intended cryptocurrency, now if you know how to set the prices having a very good projection you can make good money. Studying the graph and from other traders orders I can make a projection of what the price could be and set my orders. Many have also lost money in this process, so that why it is good you study the rules of using stop limit trade. It allows you to input your intend price to sell, whenever it reaches the price, trade is executed. The very good thing about the stop limit trade is that you can input you value, whether you are there or not, the order can be executed.
The OCO is very important tool as well in stop limit trade but understanding is also necessary as it is a very technical part of trading. In OCO's, you can place two (2) orders at a time having a fair knowledge of what the price could be, once one limit is reach, the other one cancel automatically and trade is executed. This means if one order isn't favorable, the other should be.
My personal experience in trading stop order is not a very good one as I lost money at first but when I began to understand stop and limit orders, I could set my orders then go to sleep. When I wake, my orders will already be executed.
Stop limit orders is very essential tool in cryptocurrency exchange trading but care must be observed when using it. It is preferred to do some thorough learning because using the tool to avoid losses.
ALL IMAGES ARE SCREENSHOTS FROM MY MOBILE DEVICE DURING MY LEARNING SESSION