Trading Strategy 101 – Understanding Order Books, Buy Walls, Sell Walls, and Fake Walls

At the end of this guide you will learn:

1) What an order book is.
2) What a buy/sell wall is.
3) How to identify fake walls.

First of all, what is an order book?

An order book displays all the currently active buys and sells in an exchange. Basically, this is the value where you want to buy or sell a coin. The BIDS are the amount of how people want to buy a coin while the ASKS are the amount of how people want to sell a coin.

As you can see, the highest buy value is the first in the "BID", and the lowest sell value is the first in the "ASK".

Now, let's proceed to buy/sell walls.

The buy/sell walls translate the buy and sell into a graph. Essentially, if the volume of buy far exceeds the volume of sell, a wall will form and vice versa.

The higher the buy wall, the better. Why? Because, the high buy volume translates to high demand. And if there is high demand, there will also an increase in price. Sell walls are just the opposite of buy walls.

Identifying fake walls

Fake walls are the villain in a day-trader's life. These are walls that are being put up by whales for them to control the market price. The whales have the ability to put-up or remove the walls at any time which causes drastic movement in the pricing.

The characteristics of fake walls are tall and almost 90° appearance. They typically don't have any sort of backing in the form of support and resistance in the market trend. They are also commonly valued as the lowest sell order or the higher buy order in an exchange.

For fake buy walls, whales place large orders that clones the high positive value of the currency. If a huge wall appears, the tendency is the price to go up. The walls give newbies a sense of confidence which in turn make them set their buy order at the top of the wall and make them believe that the present value is the new floor (resistance). Once everything has been set, the whale will then do a 360° turn and and suddenly sell his assets. The traders that bought above the whale's position can get burned and lose their investments. The same goes with fake sell walls, just the opposite.

Conclusion

You can use the order books as guides to see where the demand is for certain markets. However, you should not base your assumptions in order books alone. It is always better to check if the present value being projected by the walls are true and not just some artificial wall. For me, the easiest way to do this is to check for the support and resistance if the values are consistent with the values of the wall.

Disclaimer

This post is not a professional guide nor do I claim it to be. I just want to share my knowledge to my fellow crypto traders; hoping that this will help them broaden their knowledge in crypto trading. The original source material of this guide is from http://brettwestbrook.com/cryptocurrency/cryptocurrency-trading-buy-walls-sell-walls-order-books/.

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