Steemit Crypto Academy Week2S7 || EXCHANGE ORDER BOOK AND ITS USES || Submitted to @yousafharoonkhan

Great and self explanatory presentation on Order book @yousafharoonkhan.

Introduction
Alot of companies, offices, etc use order book to take down to list of proposed demand by customers, some are manual while some are electronic but which ever way it must carry the customers names, address, demanded quantity, price, date of order, amount paid for the order, possible date of supply, location and a whole lots more. In cryptocurrency its almost the same but with slight difference which we shall see as we read on.

What is an order book in Cryptocurrency
Apart from Decentralized exchanges the uses AMM (Automated Market Marker), most centralized exchanges uses what is called an order book to take orders from traders and execute trades once order is reached and price accepted.

An order book in cryptocurrency called be defined as an electronic list of buy and sell orders. They normally incorporated in all centralized exchanges and it carries the price, the trading pair. Now all currencies have its own order book featuring its buy and sell orders respectively. In carries the numbers of token bought and sold at every point in time. An order book help to inform traders to be informed about current prices and analyze current market activities.

image source

An order book also help traders track the current demand of an asset and to decide whether to buy or not and above all tracks the market depth.

Cryptocurrency order book Vs Local market order book
Local market order book are usually manual order book, however they are also duplicated so that both buyer and seller can have a copy of the placed order. Manual order books can be altered since it written or program by a third party.

image source

A local market order book gives room for signatures incase of any issues with the order.
Cryptocurrency order books are electronically driven, showing prices of what others are buying and selling so it guides you on how to buy or sell. It cannot be altered as it is controlled by Smart contracts. Cryptocurrency provides the ability to place an order on a certain price, once the price reached, the expected price is attained the order is executed.

How to find an order book In an exchange
To explain this I will be using gate.io exchange. Quite simple, once you are on the exchange select trade, your order book can be found, you can then select the trading pairs required.

Explaining the following words:

Pairs or trading pairs are tokens that can be traded for each other, an example of such is BTC/USD, this means that BTC can be traded on UST, explaining further, it means you can convert your BTC to USDT on this trading pairs and verse vica. It also allows you make some comparisons amond the two currencies.

image source

Support and Resistance are technical terms used mostly in cryptocurrency trading, as the price of a cryptocurrency decreases, its demand increases forming a Support level. A support level is basically a level were a price reduction cryptocurrency price is expected to pause due influx of buying and selling intrest of traders. An example of this is the current price of BTC, which is currently approach support level, it get to a time when the reduction is paused or a level which the reduction is expected to pause. Traders usually prefer buying at this Support level for more profitability.

Resistance in cryptocurrency usually arise due to selling intrest of holders when the prices have increased significantly. Resistance is actually the opposite of support as the sellers and at the level the sellers become more power than the buyers and even become more aggressive forcing the price down, usually not a good time to buy cryptocurrency. This is exactly what happens when you buy a coin and price reduces, you then need to wait till price increases before selling and most times after selling, price continues to appreciate and you wished you never sold.

Limit order simply refers to the maximum and minimum prices which you are willing to sell your Crypto and setting it to confirm transaction at the said price, this are limit set either to buy or sell your cryptocurrency. An example is this assuming I want to sell gate.io token, I set limit which the price must not exceed lower or higher and once my price limits is reached, transactions are executed

Market order is the opposite of setting limits, meaning in this case no limit is set but you buy at the prevailing market price of the cryptocurrency. Once the order is placed it sell or buys immediately without waiting. Assuming an investor want to buy or sell lets say BTC, he doesn't bother about the price but places the order at the same time market price as he needs to be executed as quickly as possible.

Features of an Order book
Important features of an oder book are as follows:

Buyer and Seller side : The order book can't be complete without two parties, the buyer and seller side. There is always two major parties are always involved. Some exchanges use buyer's and side instead of bid and ask.

Bid and Ask : There are two parties are then involved like we say, the buyer make a bid and the seller ask for the trade. The buyer makes a bid for a trade and files it in the order book which will be executed as soon as the price is reached. Seller ask for trade which will also be executed when prices are reached.

Prices :Prices can be located on the order book. The market prices can be seen, prices of orders bid and ask can also be seen on the order book.

Total : Order total can be seen on the order book as shown on the screenshot.

How to place Buy and Sell orders in Stop-limit trade and OCO

(Token in Wallet in gate.io exchange)

In order to learn this, I will using gate.io account for this demonstration.
A screenshot of my spot wallet on gate.io
In placing a buy and sell order on gate.io and in most centralized exchanges, you would need to understand that the buy limit order is an order to buy at a specific price while the sell order is the order to sell at the market price when the limit order is attained.

Select your preferred trading pair

Click on stop order

For an example, assuming I bought my gate.io token for 5USD and I do not want to incure a loss less than 0.1%, I will place a sell stop order just below my purchase price of 4.5 USD to usd and assuming I want to sell @ 6 USD, if the market prices falls below 4.5 USD, I might want to see off to limit my loss to maybe 3.7 USD. This is why they are used in more advanced margin trading and hedging strategies.

Note that the trigger price must be greater than the market price which in this case is 4.1 USD.

For placing a trade in buy stop limit order, the trader must have a specific prices he wishes to sell his cryptocurrency comparing with the market price. An order is set once the price reaches the intended price, the order is executed. It the same process buy you set the setting to sell.

Placing OCO order usually called one cancels the other comprises of two sections, one limit and a stop limit. Assuming I bought gate.io tokens for 2 USD and I want it's now trading for 1.7 USD, and I intend to sell it if it goes beyond 2.70 USD so I can make a profit of 1 USD, but what if the price drop to 1.5 USD I then decide to sell it off to limit my loss to about 0.5 USD.

How order book can help in Profit gaining when trading to prevent loss
The order book is full of easy settings that can make this attainable but first one must know how to use the functions contained there. With prices displayed, it is able to advise the trader what prices traders are bidding and Asking. The stop loss trades can also be executed, using limit (buy and sell). Peraventure you bought a coin and the price drops due to less demand or other issues, with your One cancel the Other function (OCO), it is very possible to still sell and prevent loss.

Conclusion
This topic have been very much practical and I want to commend you for putting up such a wonderful and intresting topic on order book, this is an area any trader in the cryptocurrency ecosystem who must know.

Thank you.