With the current pandemic outbreak, more than a quarter of the world population is under some kind of lockdown and spending most their time at home. When stuck at home, we all have more time to think about, what to do with our time and money. For some traders, this is the time to look more seriously into cryptocurrency markets. May it be due to boredom or simply because cryptocurrency trading is available 24/7 and one can start with relatively small amounts.
When you sign into a crypto exchange for the first time, there will be a lot of charts and other collections of red and green that don’t tell you much yet. Let’s change that.
In the following paragraphs, we’re going to introduce you to the tools you can find on our exchange dashboard.
This is the easy part. The price chart simply shows, where the price is at on our exchange in real-time. Depending on your preferences, you can switch between bar charts, line charts or candlestick charts. The trading view integration allows you to draw in all kinds of indicators that serve as a better orientation to identify resistance, support as well as to forecast trends. The small bars at the bottom of the price chart visualize trading volume. This can help determine if a trend is likely to continue or to reverse.
Unfortunately, you won’t find any musical instruments here. The term instruments in this case refers to financial instruments hence different cryptocurrencies and pairs you can trade. In the tabs, you can find our markets. Currently, we offer BTC, BCH, ETH and USDT-markets, you can click through them to find pairs to trade or simply search for whatever you want to trade in the search field. Don’t forget to mark any favourites for an easy overview at any time.
As a first time trader, you might just look at the prices and buy the as-is price. However, many traders define what prices they are willing to buy at and at which price they want to sell a certain currency. Accordingly, they create orders such as “Buy 2 Bitcoin at $5000”. Buy orders are referred to as BIDs and sell orders as ASKs, similar to an auction where people bid and ask for the prices they are willing to pay. The order-book is organized by price levels and improves market transparency, as it gives an overview of supply and demand at different price points. Order imbalances can help identify support and resistance levels. A high number of buy orders at a certain price could indicate support while a high number of sell orders could stand for resistance.
Simply stated, Market Depth visualizes the demand and supply for a certain asset at different prices. On the left side, you can see a staggered green line which represents all the buy orders (BIDs) while the right side stands for all the sell orders at different price points (ASKs).
Market depth is closely related to the liquidity of an asset, hence the market’s ability to sustain large orders without impacting the price of an asset. The more liquidity an asset has, the less likely is a bigger order to move prices. However, as cryptocurrencies are still an emerging asset class with a lot of low market cap coins, some market depth charts look a lot different than the one above. They might show a buy or sell wall.
Just looking at the image, you will probably already understand why it’s called a buy wall. When traders want to buy a large amount of a currency, they usually want to do so at a lower price, they compete to buy as many low-cost orders as possible. When they put up a huge order for the currency at a certain price, especially when they have a lot of monetary power, the pattern on the left looks like a wall. The wall is not necessarily such a straight line as in the example above, it can be a lot more staggered.
A sell wall is created through either a single large sell order or the accumulation of limit sell orders by several traders. This happens when traders want to liquidate a bigger amount of a coin and might lead to traders settling for less. Sell walls can create downward price pressure and harm the health of a cryptocurrency, as orders selling for any price above the limit price won’t be filled.
A word of caution
Both types of walls can happen naturally. If a project team is strong, hitting their roadmap goals and positive news are everywhere, this can create buy walls. In the case of negative news or as a consequence of hacks, sell walls are quite normal.
However, as with all things crypto, enjoy these indicators with a portion of caution. Sell and Buy walls can be created by traders with deep pockets and insight knowledge, so-called whales.🐋
What’s in it for them you might wonder? In one word: money.
In a few more words, whales can create a fake sell wall which lets them buy more of a cryptocurrency for cheaper. This makes sense when they have insight knowledge and know, that the value of that cryptocurrency will go up shortly. When that happens, the whales will go out of it with nice cashback while all small traders that settled for less will regret doing so.
When whales put up a fake buy wall, this can instil confidence in new traders. Yet, as a new trader, be aware that such a wall could be removed in an instant. Usually, it’s advisable to look out for staircases rather than straight walls in the Market Depth. A staircase with staggered support points won’t crash the price as fast as a straight wall.