Crypto Academy Week 15 , Homework Post for [ @yousafharoonkhan ]... Exchange order book and its Use and How to place different orders?

drqamu (74)Beginner[1,2,3,4,5,6,7,8,9,10]in SteemitCryptoAcademy • 4 years ago (edited)

Hello friends, Asalamu Alikum , hope you are all fine. Today i am writing my homework post for professor @yousafharoonkhan , which is about order book amd its features.

What is meant by order book and how crypto order book differs from our local market. explain with examples (answer must be written in own words, copy paste or from other source copy will be not accepted)

Order book as the name implies is the book of orders. Here book refers to written or printed records and the records that it keeps are orders and the orders are of buy and sell type. So we can say that an order book is a record of buy and sell orders that are placed by buyers/sellers at different rates as per their convienence. It is something which we understood from the meaning of order book.

Crypto order book is slightly different, here records of traded pairs are kept. For example, STEEM/BTC , suppose any trader buys BTC in exchange for steem, its record will be maintained on the order book under STEEM/BTC buy orders. Similarly, let's say another trader buys BTC from ETH. This record will be maintained on order book under specific section.

Let's take example of sell orders, suppose a trader sells STEEM and gets BTC, the record will be maintained in sell orders section of order book.

Order book is not something unique to crypto trading only. Order books are used on day to day basis in our local markets as well. They differ from crypo order book in few points like ;

No trading pair system is seen. Instead a single currency is used to buy or sell things in our local markets.
The local market order books are not accessible to every buyer /seller. instead they are accessibe to owners of markets or a particular seller/buyer can only see their own details only . It is not in public domain unlike crypto order books that are maintained on blockchain which is a decentralized public ledger accessible to anyone, amywhere and anytime.
In local markets, there is not much scope for price negotiation because there is no significant price volatility.
There is no automatic filling of orders on predefined prices unlike crypto order book.
No such features like stop limit orders and OCO orders are possible locally.
No technical analysis can be done in local markets like price predictions. Because local markets don't determine price, instead prices are driven by increase or decrease in supply/demand nationally or internationally or by chamge in government policiies. Such things can't be predicted from local order book.

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.(Answer must be written in own words)

Pairs
Support and Resistance
Limit Order
market order

I have been using Binance account for crypto trading from the beginning. So there are two ways to explore binance, one is through web browser and other is through app. Of these two let me explain it with the help of binance app.

Log in to your Binance app.
At the bottom panel of the main page , we have option Market. Click on it and the next page with
multiple trading pairs and different markets like spot, futures will load. Select any trading pair you wish to look for. You can also search for desired pair. I searched for STEEM/BTC.

Click on target pair and next page with details will be loaded. Just below the price chart of the pair, we got to see "order book". Below order book different orders are listed.

Trading pair

Trading pair refers to two assets paired together on an exchange that can be traded for each other. Example, Steem/ BT. It is a crypto trading pair in which we can bring or sell either of these assets for each other. To further simplify, we can buy BTC from steem or Steem from BTC or in other words, we can sell steem for BTC or BTC for steem.

So trading pair can be either crypto to crypto pair or crypto to fiat pair. Example, BTC/ETH is an example of crypto to crypto trading pair and BTC/USD is an example of crypto - fiat trading pair.

Support and Resistance.

Support represnts a price level where a downtrend is expected to pause. During downtrend as price of asset decreases, buyers try to take advantage of the decreasing price and thereby try to halt the downtrend by purchasing more and more asset and therefore price is expected to rise. So it represents the point to place BUY order. Support line can be compared to a floor which prevents price from pushing downwards. Support line can be obtained by joining the tops of downward running price peaks.

Resistance represents the point where an upward trend is expected to stop, which means price of asset is expected to come down. It marks the point where a trader is expected to place a sell order. Resistance can be compared to a ceiling above which price rally runs out of energy and tends to fall back. Resistance line can be obtained by joining tops of uptrending peaks.

^{ETH/USDT pair from my wazirx account}

In the above example, i have marked support and resistance levels for ETH/USDT pair . As you can see, while ETH was going down, somewhere around 1450 USDT price, ETH was able to pull back multiple times, so it acted as support level because it marks level where downtrend of ETH halted and price started rising. So buy order can be placed.

On the otherhand, if we look at Uptrend of ETH, it came to halt multiple times around 1850 USDT, forming a resistance level for ETH. So it is a sell signal.

The other way to look at support and resistance is to check history of trading pair from order book and find buy and sell prices. We can find support level where maximum biuy orders have been placed and we can look for resistance level where maximum sell orders have been placed.

Limit order.

It is that type of buy or sell order where a buyer or seller places order of an asset at a price differenr from the spot price or market price (existing price at that point) . Example, suppose i want to sell 1 BTC in market and at the time of placing order, market price of BTC was $45000 but i was not satisfied with this price, so i set my own price limit at $50000 . So this is a limit order. It will only be executed once BTC price reaches $50000 . Same holds true for buy orders, suppose i wanted to buy 1 BTC . I saw market price at that time was $45000. But i wanted to buy it at lower price. So i place a limit order with price of $40000 (say} . This order will only be executed once price reaches that level.

Market order.

It is that type of buy or sell order where a buyer or seller places an order at a price that is existing in the market at that point of time. So these orders are rapidly executed because buyer or seller wanted to sell at a price which the counterparry on the other side is ready to pay. So no time is needed to wait for favourable price fluctuation to occur. Example, market price of BTC is $33017 right now. If i place buy or sell order at the same market price. This order will be called market order and will be executed instantly.

Explain the important future of order book with the help of screenshot. In the meantime, a screenshot of your exchange account verified profile should appear (Answer must be written in own words)

Before explaining important features of order book, let me share a screenshot of my verified binance account as demanded. ![1621795874222.jpg](

) Screenshot o my f verified binance

Features of order book

As we are talking about cryptocurrencies and the fundamental feature of crypto trading is trade carried in pairs. So crypto order book is a record of buy/sell orders of crypto pairs along with other details of crypto assets like supply, market cap, volume, price etc. Let's take an example of order book from my binance. Look at screenshot below:

It represens buy and sell open orders of STEEM/BTC from my binance account. In screenshot first, the orders written in green are buy orders and those in red are sell orders. So from the order book, we can see price of a particular trading pair and different prices at which buyer and seller are doing trade in the market.

The crypto order book is "dynamic" In nature. It means that above orders are open and they are getting executed continuously. So if we check the order book of the same pair after some time, we won't find same orders as shown above. Let me again show you order book of same pair, less than 5 minute have passed when i have taken above screen shot. Compare that with below given screenshot.

Now let me demonstrate how to place buy and sell orders in spot market.

Buy order.

Buy order means you obtain some cryptocurrency that you need for trading purpose in exchange for other crypto or fiat that you have. So we have to select a trading pair containing one cryptocoin that we have on the exchange wallet and the other coin that we want to purchase. Example, i waited to buy BTT from TRX, log in to my binance, from bottom panel, click on market, next search for BTT/TRX pair and order book will load. These steps have already been shown above.

Next we click on Buy.

On the next page, fill details like amount of TRX to be sold. We can also select the percentage of total TRX to be sold from the amount that we have . For market order , price of TRX has to be same. However, we can alter it too than it will become limit order.

At the market price, i selected to sell 100% of TRX ( 20.08) and for which i would get 403.3 BTT. Then hit the "Buy BTT" Button. Order is placed.

Sell order.

Sell order means you want to give /handover /exchange some cryptocurrency that you have for trading purpose in exchange for other crypto or fiat that you need. So we have to select a trading pair containing one cryptocoin that we have on the exchange wallet and want to sell and the other coin that we want to get in return. Example, i wanted to sell Steem for BTC. Go to market, select STEEM/BTC pair, order book will load and click on sell.

On the next page, fill details like amount of STEEM to be sold. We can also select the percentage of total STEEM to be sold from the amount that we have . For market order , price of STEEM has to be same. However, we can alter it too than it will become limit order.

At the market price, i selected to sell 100% of STEEM ( 10 ) and for which i would get 0.00013780 BTC. Then hit the "Sell Steem" Button. Order is placed.

How to place Buy and Sell orders in Stop-limit trade and OCO ,? explain through screenshots with verified exchange account. you can use any verified exchange account.(Answer must be written in own words)

STOP LIMIT ORDER

Before placing stop limit order, let us understand what this order is all about. Basically stop limit order, is a combination of stop loss and a limit order. It is a type of order intended to lock in profit or minimise loss by setting stop and limit price beforehand. So before placing this order, thorough understanding of of asset to be traded is necessary. We need to have basic knowledge about the support and resistance of the asset, on the basis of that we are going to place stop - limit order. For stop limit order, we need to set two prices :

Stop price : The start of target price. At this price, the stop limit order becomes limit order.
Limit price: The lower limit of target price . At rhis price the limit order is likely to get executed.

How to place stop - limit orders.

Open binance account, click on market and select the pair to be traded. Just below buy and sell, there is option limit. Click on it. A drop down memu will appear. Select stop limit from the menu.

Buy stop limit order.

Let me try to place buy stop limit order for BTT.

I set stop price at 0.054 (TRX per BTT) and limit price at 0.051 (TRX per BTT) . Once price of BTT reaches stop price, our order will become limit order and will be executed at limit price. But there is no guarantee of order execution .

Sell stop - limit order.

Let me try to sell STEEM for BTC. I set stop at 0.0000150 and limit at 0.0000145 .

When the price of steem reaches stop price, order will become limit order and will be executed at limit price but there is no guarantee for execution.

How to place buy sell order in OCO.

One - cancels - the-other - order - OCO is a pair of orders clubbed together in which if one order gets executed the other is automatically cancelled. Suppose, we place a limit and stop limit order, if limit order gets executed, the stop limit will be cancelled automatically. Similarly if stop limit is executed, limit order gets cancelled. OCO order is used to trade in a volatile market to minimise the risk and maximize the profit

Let's see how to place these orders. Basic procedure will remain same. Log in to binance. Click on market. Select trading pair. Next select buy/sell and change order type to oco like above where we selected stop - limit.

Buy OCO order.

Here I'll try to buy BTT from TRX. I am placing limit and stop limit order. For limit order i set price at 0.060 and for stop limit, i set stop price at 0.55 and limit price at 0.045.

Suppose the market price of TRX goes up and touches 0.65 , so it triggers limit order and gets executed. The stop limit order will be cancelled automatically. If the price of asset goes down and touch the stop price of stop limit order, the stop limit order will become limit order and will be executed at its limit price. Limit order will be cancelled by default.

Sell OCO order

I now tried to place OCO sell order, i placed limit price at 0.0000050 and for stop limit order, stop price is at 0.0000040 and limit price at 0.0000030.

If the price touches limit price of limit order, it will be executed and stop limit order will be cancelled. On the other hand, if prices goes down and touches stop price, order will be be triggered and executed at limit price of stop limit order with cancellation of limit order.

How order book help in trading to gain profit and protect from loss? share technical view point, that help to explore the answer (answer should be written in own words that show your experience and understanding)

Through this course, we have seen different features of order book like market order, limit order, stop limit order, oco order. All of these features of the trade book can help a trader in maximizing gains and minimising losses. Let me tell you how.

Suppose you hold an asset and you saw that there is an abrupt rise in the price of asset and you wanted to gain profit by selling this asset in real time. For that, order book provides us the facility of market order in which orders get executed instantly. So we can make use of market order at that time and gain profit. Same holds true for buy orders, suppose you saw the price of asset going down and you want to purchase it at any particular price. Place the order at market price and buy that asset. Hold the asset and wait and sell later when price goes up

Similarly, if you can't keep watching price of asset continuously but you want to sell it at profit, you can place limit order at Higher limit price and when the price reach that level, your order will get executed and you will earn profit . Similarly stop loss can be used to minimize loss .

Stop limit order is another type of order placed where you are not sure about market price trend, so to minimize loss, stop and limit price are set to execute trade with some. Profit or minimum loss.

OCO order help traders perform trade in volatile market by clubbing two types of orders together so as to gain some peofit and minimise loss.

Next we move on to derrivation of technical details like support, resistance, supply and volume of tokens. When we critically analyse order book, we can find the support by looking at a price range where maximum buy orders are placed. Similarly, we can look at price ramge around which maximum sell orders are placed and find resistance level of an asset. On the contrary, these tasks are being carried on teachical charts by joining price peaks as mentioned above. Moreover, trading volume and supply of tokens can be found from order book. Even we can find , whether buyers or sellers are dominating the market which inturn help in prediction of future trend of an asset. It is analogous to use of RSI Indicators where certain predefined values are doing same job like RSI of 30 means ovebought and 70 means oversold.

Conclusion.

Order book seemingly a less important feature of any exchange when analysed keenly can prove a potential useful tool. It not only helps in placing buy and sell orders of different types but also help in establishing certain technical indicators like support, resistance, supply , demand, volume, market trend etc.