Understanding of the order flow and its impact on Bitcoin trading (BTC)
The world of cryptocurrency trade has grown exponentially in recent years, with prices that flow rapidly due to market feelings, economic indicators and regulatory changes. A key factor that contributes to these price fluctuations is the flow of orders, which refers to the number of purchase and sale orders made at a specific price. In this article, we will deepen the concept of order flow and its impact on Bitcoin trading (BTC).
What is the flow of order?
The order flow represents the cumulative sum of the purchase and sale orders made by individual traders and institutions within a specific period of time. It is essentially a snapshot of the demand for the market of specific activities. The flow of the order can be classified in different types, including:
* Buy orders : represented by green arrows in the following graph, these represent the purchase of a resource.
* Sales orders : indicated by red arrows, these represent the sale or liquidation of an asset.
types of order flow
There are different types of order flow that can be observed in cryptocurrency exchanges:
- Normal order flow : this is the typical scenario in which the purchase and sale orders are balanced in a certain period of time.
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- MARKET TENDENSES : When the price of a heritage is at the top or downwards, the flow of the order tends to favor one direction on the other.
Impact on Bitcoin Trading
The impact of the flow of order on Bitcoin trading can be significant:
- Discovery price
: the flow of the order determines how the prices on the market are discovered and resolved. When there is a volume of purchasing high at a certain price, it can indicate that more buyers are willing to buy the activity, increasing the price.
- Mercato feeling : The direction of the flow of order often reflects the feeling of the market. If most traders buy or sell in one direction, it can report a strong trend. On the contrary, if there is an imbalance between purchase and sale orders, it could indicate potential reversal.
- Risk management : Understanding the flow of order helps operators to better manage the risk. For example, if an activity has high volatility during normal orders flow periods, traders can take advantage of these fluctuations by purchasing or selling during the calm periods.
Examples of the real world
To illustrate the impact of the flow of orders on Bitcoin trading, we consider some examples:
- 2017: The “White Whale” effect : During the 2017 cryptocurrency boom, a single investor (often called “whale”) purchased millions of btc dollars at extremely low prices, creating a huge purchase order that fueled its increase in prices.
- ** 2020: The collapse of the Covid-19th market market: while the global markets reacted to the Covid-19 pandemic, the Bitcoin price fell, with an unusually large quantity of sales orders that flooded the market. This caused a significant drop in purchase orders, leading to a short correction.
Best Practice for operators
To effectively navigate the flow of the order and its impact on Bitcoin trading:
- Monitoring exchange data : stay updated with information on the order flow in real time from exchanges such as binance, money or kraken.
- Use technical indicators : use tools such as mobile media, RSI (relative resistance index) and Bollinger bands to help identify potential trends and inversions.
- Take into consideration the analysis of the feeling of the market : seek changes to the purchase and sale orders that could report a change in the feeling of the market.
- Diversify your portfolio : spread your investments in various cryptocurrencies to minimize risk.
Conclusion
The order flow is a critical factor for understanding Bitcoin’s prices movements (BTC), influencing its trading dynamics.