What is order book analysis?

Market participants use the order book not just to trade stocks, commodities, cryptocurrencies, etc. but togain an insight into market depth, volatility, investor behavior and an asset’s overall ‘health’. This is often referred to as order book analysis. What is an order book?

How does order book data work?

As can be seen below, the walls increase in height as the cumulative order totals are added, and ultimately cover the entire order book on the exchange. Visual order book data allows traders to place bids or asks with more precision, e.g. a sell order immediately below a large sell wall increase, and vice versa.

What is a stock order book & how does it work?

The order book helps traders make more informed trading decisions. They can see which brokerages are buying or selling stock and determine whether market action is being driven by retail investors or by institutions. The order book also shows order imbalances that may provide clues to a stock’s direction in the very short term.

What does an order book look like?

Normally, an order book comes with a table of numbers consisting of prices and total amounts from two sides. To better represent the relationship between buyers and sellers, most of the order books come with a visual demonstration as well. It can be in the form of a line chart or others.