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

Assalamualaikum professor @yousafharoonkhan and to everyone reading this.

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This is my assignment post by our respected Professor Mr. Yousaf.

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Lets get started

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Q1)

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)

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An order book is a list of of the recorded buy and sell orders placed by traders in the market. It is comprised of all the data of the buying and selling from the traders. It also records the market depth.

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So this is what an order book is. Now lets see what does an order book mean in the cryptomarket

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Order book in the Cryptomarket

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In cryptomarket the order book keeps a record of all the trades but in pairs

For example: BTC/USDT

A trader buys BTC in exchange of USDT his record will he maintained in the order book under the recorded data of USDT/BTC

There are sell orders as well buy orders

Sell orders

For example you sell BTC and get USDT, this trade will be recorded under the section of sell orders

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Buy orders

Now if a trader buys BTC in exchange of USDT. This transaction will be recorded in the buy orders.

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I hope the concept of order books was clear. Now we'll look on to the differences between order book in the crypto market and order book in the local market.

Differences	Local market	cryptomarket
Trading in pair	No pair trading. Traders usually use a currency in transactions.	trades are in pairs. eg: BTC/USDT
Accessibility	the local market order book is not accessible to every trader. It is not public	while in cryptomarket. Everything is decentralized. Means public.
Trading options	single trading option	various options which includes limit order, stop limit orders and various others
Technical analysis	not so efficient in local markets as prices are controlled by governing bodies	technical analysis plays a vital role. For example using various indicators such as MACD, RSI etc
Negotiations	usually fixed prices	volatile market which provides different prices for trade options.

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I hope all the points asked in the question were answered and are also clear to you all.

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Q2)

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

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I'll be using my binance account to answer this question.

• first of all login to your binance account

• then click on the market options as showed in the screenshot below.

Here you can see different options:

• Favorites
• Zones
• spot markets
• Futures market

Here you will click on the spot market as shown in the screenshot above and you will then choose a pair of your choice for the demonstration.

I chose the ADA/BNB pair as I have already invested in ADA as well. You can search for your desired coin in the search bar on the right as shown in the screenshot.

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After clicking on the ADA/BNB pair as shown in the screenshot. A new tab will open.

The order book in RED is the SELL BOOK ORDER

The one in GREEN is the BUY BOOK ORDER

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TRADING PAIR

In the Cryptomarket a trading pair means the two coins or two assets which can be traded against each other.
For example the pair I chose above ADA/BNB. This is a trading pair. Which means you can sell ADA and buy BNB or you can sell BNB and buy ADA. All the trades are recorded in the exchange order book.
There's another type of a trading pair known as the FIAT PAIR

FIAT PAIR:
fiat-based pair works the same as a cryptocurrency-based pair, except one of the assets being exchanged is a fiat currency which means dollars. For example BTC/USD

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SUPPORT AND RESISTANCE

Support:

This term refers to the lowest point of asset's value. After the support level the the downtrend usually stops and starts going up. If sometimes a coin's price brraks the support level then a huge crash is expected
The support level is the cheapest point to invest in a coin. People usually buy at this point and then make profit when the trend goes upwards

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RESISTANCE:

This is the peak maximum point of an asset's price. At this point the price is the top most and people usually sell their coins at this point to make huge profits. So when people start selling in bulk, the prices start gradually going down.

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LIMIT ORDER

It is that type of transaction where the buyer or the seller wants to sell the asset at some price higher than the current price (market price).
For example. The current price of ADA is $1.5 but I want to sell it in $2.0 so I will set a limit order of $2.0
The order will be completed as soon as the price of the coin reaches $2.0

The same way it happens when buying a coin.
For example I want to buy ADA at $1.4 but it is currently at $1.6 so I will set a limit order of $1.4 so whenever the coin value regresses to $1.4 the transaction will automatically complete and buy me the coin at my desired value.

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MARKET ORDER

Market order is that type of transaction where the trader sets a price which is accordingly to the market price. This type of order takes no time in getting completed as the buyer is getting his desirable amount and the seller is also selling in what he wants.
For example: the current price of ADA is $1.56 if I place an order at this same price. My order will be carried out immediately.

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I hope all the points asked were thoroughly covered

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Q3)

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)

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before showing information let me show you the verification of my binance account

Features of the order book

The order book as explained keeps the record of all the trades occuring of a pait. It also keeps the information regarding the market capitalization, volume, supply/demand etc

Lets demonstrate the order book from my binance account:

This screenshot represents the order book of the ADA/BNB pair.

The green section shows the buy orders and the red section shows the sell orders
The prices are very clear through this order book.

The orders are continuos and will carry out with the course of times. Obviously there are thousands of traders trading so the values keep changing.

Lets see how the trading is done through this order book

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Buy order

This basically means to get a cryptocurrency in exchange of some other cryptocurrency or USDT
For this we have to select a trading pair. For example I wanted to buy USDT from VET

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So I logged in to my binance account. Then clicked on market and then on SPOT MARKET from there I clicked on FIAT MARKETS then I will click on VET/USDT as shown in the screenshot below to be specifically clear

After clicking on the pair a new tab will open with an order book present. There we will click on buy as shown in the screenshot below.

On the buying option fill the the details like how much VET you want to buy. An then it will show you the amount of USDT needed to process this transaction.

As you can see in the screenshot below that I chose to buy 20 VET which showed me a total of 2.184 USDT

once you have decided the amount you can hit the buy Vet button

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SELL ORDER

this option means that you want to exchange your asset in return of a different asset. To demonstrate the example I will choose VET/USDT pair. As shown in the screenshot below. Choose on the sell option

As shown in the screenshot below. I chose to sell 30 VET which will give me 3.27 USDT

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So as demonstrated thoroughly the features of the order book.
All the points are discussed

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Q4)

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)

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Before showing the graphical representation let us understand what actually is a stop limit order

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STOP LIMIT ORDER

This is a combination of the stop loss and the limit order

Stop loss is activated so that you do not get loss. And the limit order is kept to get the maximum profit.
In stop limit order we need to have two prices:

• Stop price: this is the start of your targeted asset price.

• Limit order: this is the lower limit of the target price. Usually at this price the limit order gets completed.

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How to place stop-limit order

First of all chose a trading pair for this option. I will choose the VET/USDT pair to demonstrate you the option of stop-limit order

Lets put a stop limit order in action

Buy stop-limit order

Demonstrating a buy stop-limit order on VET/USDT

I set stop price at 0.11 (VET per USDT) and limit price at 0.10918(VET per USDT)
When the price of VET reaches the stop price, the transaction will become the limit order and the order will be executed at this price.

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Sell stop-limit order

Again I chose the VET/USDT pair and I set stop at 0.10960 and limit at 0.10929

When the price of vet reaches the stop price, the order will be executed.

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How to place buy sell order in OCO

One - cancels - the - other (OCO) is a combination of orders joined together in which if one of the order gets completed the other one is cancelled automatically.

For example in a trade if we set the limit as well as the stop-limit order and the limit order gets done, the stop limit will be cancelled automatically. Similarly if the stop-limit order gets completed the limit order will cancel.

This option is usually used in highly fluctuating markets in which you can get quick profits and can also minimize your loss.

Lets demonstrate how to use this option:

The procedure would be to login to your binance account select the trading pair in the market. Select the buy/sell option and (as shown above). Now here chose the OCO

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Buy OCO order

I will choose the VET/USDT pair for this trade. Here a limit order and a stop-limit order is placed. The OCO Limit the price is set at 0.12 and the stop-limit order at 0.11

If the market hikes up to 0.125 it will trigger the limit order and the order will be executed. Which means the stop limit order got cancelled automatically. And if the price goes down and touches the stop price of the stop-limit order then the stop-limit order will turn in limit order and will be executed thus cancelling out the Limit order.

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Sell OCO order

Now executing the sell OCO order. I put the OCO limit at 0.10980 and for the stop-limit order, the stop price at 0.10965 and the stop price at 0.10929

If the price reaches the limit price of the limit order, it will be completed and the stop-limit order will be cancelled. If the prices go down and hit the stop price, the stop-limit order will be triggered and the order will be carried out at limit price of the stop-limit order. Cancelling out the limit order.

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The points were thoroughly discussed in the above question and we learned how to use the stop-limit order and the OCO.

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Q5)

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)

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In this lecture we have learned how order book is such an essential tool in the Cryptomarket. We went through various features of the order book like the stop limit order, the market order, OCO order. These features help you in maximizing profits and minimising losses

For traders who also have other jobs and they cannot sit infront of the market all the time. The order book gives an excellent feature of the limit order through which you can set your desirable price and if the market price reaches that amount then your order will be automatically executed and you will get profits.

The stop limit order is my favorite feature which helps you in getting away with most minimum losses.

The order book also provides us the feature of the market order. For example you see that the market has suddenly taken an uptrend. And now you want to sell your asset in a profit immediately. So this market order feature gives us the possibility of having your orders executed instantly thus giving us huge profits. Or you see the market is taking a crash. So you use to market order to sell your assets immediately to minimize the loss.

Furthermore the OCO order helps when there is a lot of fluctuation going on in the market. This will join two types of orders in helping you get profits.

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Furthermore using the features of the order book simultaneously with the Technical indicators such as the MACD and RSI will also help you in the analysis alot. These indicators alngside the orderbook will maximize your profit gains.

Also the support and resistance is also an important thing to keep an eye on. For example the support level is the minimum level an asset can go. Here you can buy assets in low prices and sell it in good profits.

The resistance level is the peak point where the price of the asset touches in an uptrend where you can sell your assets to get the maximum profit.

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CONCLUSION

This was a very informative lecture in which we learned about the order book in depth. We learned how the features of the order books could help you in gaining the profits as well as understanding the market in depth.

Order book helps significantly in technical analysis. Also in support and resistance levels. I think order book alongside technical indicators such as MACD, RSI and parabolic SAR helps a lot in trading.

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Thank you professor @yousafharoonkhan for this elaborative lecture. This really increased my knowledge and it took me a lot of time making this assignment. Hope you like it.

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all screenshots are taken from my binace account

Regards,
@huzaifanaveed