In cryptocurrency trading<\/a>, a \u201cbuy wall\u201d is a massive buy order, or multiple buy orders, around a particular price level. Conversely, a \u201csell wall\u201d is a significant accumulation of sell orders at a given price level.<\/p>\n Before understanding how buy and sell walls work, it is important to know what an order book and its market depth are.<\/p>\n An \u201corder book<\/a>\u201d is an index listing buy and sell orders for a specific cryptocurrency based on price levels. A trade is executed when the orders on either side meet at a certain price level, establishing the cryptocurrency\u2019s price as supply meets demand.<\/p>\n Nonetheless, these orders don\u2019t get executed randomly \u2014 rather, the market fulfills them in the order of their sequence.<\/p>\n For example, two open orders are created when Peter Griffin attempts to sell 1 Bitcoin (BTC<\/a>) for $25,000 and Cleveland Brown places an order to buy 1 BTC at $24,000. Suppose Glenn Quagmire joins in and tries to sell 1 BTC for $26,000. As a result, there are three unfulfilled, open orders.<\/p>\n But when a new buyer, Joe Swanson, enters the market and tries to buy 1 BTC for $26,000, he does not get Quagmire\u2019s coin. Instead, he receives Griffin\u2019s BTC for $25,000, and the Bitcoin spot price<\/a> becomes $25,000.\u00a0<\/p>\n Meanwhile, Brown\u2019s and Quagmire\u2019s orders will remain open.\u00a0<\/p>\n The open orders are packed together as buy and sell orders and pitted against one another on a market depth chart.<\/p>\n The X-axis on the graph represents the bid (buy orders in green) and the ask (sell orders in red) price, while the Y-axis represents the cumulative market volume. <\/p>\n A large spike sloping upward on the market depth chart\u2019s either side is called a \u201cwall.\u201d These walls appear as deeper vertical lines resembling the side angle of a staircase, as seen in the example above.<\/p>\n A buy wall is formed when the number of buy orders massively exceeds the sell orders at a given price, thus illustrating greater demand for the cryptocurrency versus its supply. As a result, traders see the levels where buy walls appear as areas of support for a potential bounce.<\/p>\n Similarly, a sell wall is created when the number of sell orders surpasses the buy orders, showing weaker demand versus supply at a certain price level.<\/p>\n Related:\u00a0How to trade bull and bear flag patterns?<\/a><\/em><\/strong><\/p>\n A big buy wall against a drastically smaller sell wall on the market depth chart suggests strong demand and that the path of least resistance is currently to the upside, and vice versa.<\/p>\n Ultimately, viewing the order book as \u201cwalls\u201d makes it easier for traders to spot potential areas for price rebounds and rejections. <\/p>\n As a note of caution, buy and sell walls should not be solely relied on to predict price direction. Orders can be pulled or introduced anytime, with market dynamics always in flux. <\/p>\n Moreover, \u201cwhale\u201d traders<\/a> can use their large capital to create or remove large walls of orders as a way to manipulate the market to their advantage.<\/p>\n For more tips about spotting and avoiding potential market manipulation, check out Cointelegraph\u2019s previous coverage<\/a>.\u00a0<\/p>\n This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.\n<\/p>\n<\/div>\nWhat is an order book in crypto trading?<\/h2>\n
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What is market depth?<\/h2>\n
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Identifying buy and sell walls<\/h2>\n
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