For example, the levels with the volumes of more than 0. The margin trading implies opening two trades instead of one: first, you buy and then sell to close this trade. This is why there is a link formed between the left and the right order books. For example: if a batch of stop-losses is triggered in the left order book, a part of trades disappears from the right order book. Truly speaking, for now it is hard to say what particular trades have disappeared.
It would be nice if you realize by yourself how the link between these order books is formed. Move the mouse cursor over the chart in DOM snapshots tool. You can notice in the left order book that volumes rise at particular levels, decrease at other ones and remain the same at some levels. One can conclude from it that if trades rapidly appear at some level it follows that the level is of interest and price will interact with it.
In the right order book, we can see that Buy trades are closed faster than Sell trades at certain levels and vice versa. If we compare the order books displaying similar price but after some manipulations, it often becomes clear what was the point of these manipulations. Net value is the difference between selling price and buying price. More details in the picture below:. The "net value" facilitates identification of the levels where either buyers or sellers dominate. Many people think that the equation of buyers and sellers the net value approaches zero neutralizes price level following which the level is no longer interesting.
We cannot fully agree with the statement but there is some truth in it. If the net value is enabled in the left order book, you can clearly see "spikes" with stop-losses. However, the "spikes" are equally well visible while the net value is disabled. There are situations where the net value hurts, for example:. The net value performs better in the right order book open trades. The right order book always looks like "packed with trades" close to price and it makes it harder to figure out who dominates at the levels — sellers or buyers.
The net value helps to clarify it very well. See for yourself:. As a result, the range of the prices covered will be narrowed approximately by two times and the prices will be displayed in more detail. Zooming is good at more precise identification of the accumulation levels. Our eyes like deceiving us…. Market orders are not displayed in the order book since they are immediately executed. As the picture shows, the ASK price has moved up at 1 point when a trade is made.
This is what they call the price formation process. Thereafter, if the buying activity exceeds the selling one in the market, price will go up, and vice versa. The stock exchange order book is a table of data on Limit orders to Buy and Sell for a particular financial instrument.
The stock exchange order book enables traders to estimate the liquidity of an instrument at any given time. It is generally used to identify actual support and resistance levels. However, there are numerous methods to analyze the order book — for example, scalping using the order book is an extremely popular method.
Visually, the stock order books are different, and how they appear depends on the trading terminal that you use. However, they can be classified into two types:. Notice that there are "empty" prices in the advanced stock exchange order book. It better suits for estimating instrument liquidity, and the histogram makes it easier to perceive volumes.
So, we have concluded that the order book is a purely stock exchange tool, but most readers of this article are more likely interested in the Forex market. Therefore, this raises the question of whether the order book exists in the Forex stock market. The indicator enabling to display the order book in your MT4 terminal appeared.
Click this link to learn more and download OrderBook indicator. Currently, none of the existing liquidity providers offer the Forex market order book online. Maybe, some financial regulator will force them to do so in the future, but these data are not available to the public as of today.
On the other side, the Forex market is ten or even hundred times faster and more liquid than other markets. The only thing Forex traders can hope for is order books from big brokers.
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A limit order book is a record of outstanding limit orders maintained by the security specialist who works at the exchange. A limit order is a type of order. A central limit order book (“CLOB”) is a trade execution model based on a transparent system that matches customer orders (bids and offers) on a 'price/time. The limit order book is the list of orders (prices at which you can transact) for a given security. Depending on the security, these orders may be on one.