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What is an Order Book and How Does it Work?

The Quidax order book recently went live, and many Quidaxians have been trading with it ⚡. Considering that the new feature is best suited to experienced traders, some Quidaxians (especially newbies) have questions about what it is and how it works.  

So, what is an order book, and how can you trade crypto on the Quidax order book? We explain it all in this guide ✍️. 

What are Crypto Order Books?

A crypto order book is a ledger that displays the records of every buy and sell order for a particular trading pair on a cryptocurrency exchange. 

The order book works in real-time, so it lets you view a list of all the available orders from buyers and sellers to determine a coin’s current demand and supply. 

Still not clear? Picture this 👀. 

When you walk into a store to buy a pair of sneakers 👟, you’ll see different designs and sizes with individual price tags. Consider the pair of sneakers a cryptocurrency pair like BTC/USD. 

In this case, the price tags are the sell orders – the minimum amount the seller is willing to take for the pair of sneakers.

As a buyer, you’ll choose a pair you fancy and are willing to match its price. That’s similar to a buy order – the maximum amount a buyer is willing to pay for the pair of sneakers.  

The only difference is that you must enter your real-time buy (bid) order in a public ledger. and the seller must do the same with their sell (ask) order. That ledger is called an order book 📖. 

So, you can think of an order book as a digital marketplace where buyers and sellers connect to trade cryptocurrencies at their preferred prices. 

What Does an Order Book Contain? 

There are different information within an order book. These include: 

  • Price levels show the highest price a buyer is willing to pay for a coin or the lowest price a seller is willing to accept.
  • Order quantity shows the amount of coins traders are buying and selling at each price level. The information here helps traders gauge the average market sentiment.

Large sell orders indicate a bearish market, while large buy orders represent a bullish sentiment.  

  • Market depth indicates the total volume of all buy and sell orders at different price levels. The information gives you an idea of the market’s liquidity (how easy it is to buy or sell a coin). 
  • Order types represent the different orders you can trade with at a specific time. They are divided into limit orders and market orders. 

A limit order shows the specific price you want to buy or sell a coin, giving you more trading freedom to buy or sell at a desired time. But a market order completes your trade at the best price available. 

How Does an Order Book Work?

As stated earlier, crypto order books function using the buy and sell orders on a cryptocurrency exchange. So, a typical order book has the buy and sell sides for buy and sell orders, respectively.

The Buy Side 

A buy order shows the demand for a specific coin at a particular price. So, an order book’s buy side shows all the open buy orders below the last traded price. It represents a buyer’s interest in the coin. 

It’s like saying, “I want to buy X units of BTC, and I am bidding with the hope of getting them from a seller at a specific price.”

The Sell Side 

A sell order shows the coin’s supply at the time of trading. So, an order book’s sell side shows all the open sell orders above the last traded price. It represents a seller’s interest to sell a coin. 

It’s like saying, “I want to sell X units of BTC and asking someone to buy from me at a specific price.” 

Once a buyer’s highest bid (buying price) matches a seller’s lowest ask (selling price), the order is filled (completed) 🤝. But if the order isn’t completed at the end of the trading day, it’ll expire unfilled. 

Why Should You Trade with an Order Book?

There are many benefits to trading cryptocurrencies with an order book. Let’s look at some of them below. 

Better Control 

An order book lets you buy or sell a coin at your preferred price, giving you more control over your trading activities 🛂. 

Transparency 

The transparent nature of crypto order books makes it possible for you to see live supply and demand movements for a coin and ultimately make informed decisions 🪟.  

Competitive Pricing 

With the live price levels displayed by an order book, you can find fair and competitive prices to buy or sell a coin 🤏. 

High Liquidity 

Order books create high liquidity for traders with high trading volumes and institutional investors to execute trades quickly 🌊. 

Still, it’s important to note that an order book can be complex for beginners. So, it is recommended for experienced traders.

How to Use the Quidax Order Book on Mobile

Ready to try your hands on the new Quidax order book? Follow the steps below to trade on the mobile app.

  • Sign in to your account on the Quidax app. 
  • Tap on the “Trade” icon at the bottom of the screen and select “Order Book.”
  • Tap “Continue” on the next screen to accept the terms and conditions.
  • Select your preferred trading pair.
  • Click the green “Buy” button to create a bid or the red “Sell” button to create an ask. 
  • Choose your order type between a “Limit Order” or “Market Order.”
  • Set your order price and volume for a limit order or only the volume for a market order.
  • Place your order. 
  • Wait for a buyer or seller to match the order. 

How to Use the Quidax Order Book on the Web

If you prefer trading on the Quidax order book using the website, follow the steps below. 

  • Sign in to your account using the web app.
  • Click on “Order Book” at the top-right corner of the screen. 
  • Choose your preferred trading pair, like QDX/USDT.
  • Select between a market order or a limit order. 
  • Set your order price and volume for a limit order or only the volume for a market order.
  • Click the green “Buy” button or the purple “Sell” button to place your order.
  • Wait for a buyer or seller to match your order. 

As we countdown to the end of April, we still have loads of goodies for ladies (and gentlemen) this month. Start your Crypto journey with FREE coins courtesy of @Quidax!

Simply download the Quidax app, use the code QPearl as your referral code, complete sign up and KYC and you get your coins. 

There is also a beginner friendly course that is absolutely free if you would like to do some learning before trading. Checkout @quidax to learn more.

 

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