How to Read Order Books & Market Depth (Crypto Trading Explained)
Learn how to read crypto order books, understand bid-ask spreads, and use market depth to spot trading opportunities like a pro.
Hey, it’s Lanzo 👋
If you’ve ever looked at a crypto exchange like Bybit or Binance and seen a wall of numbers changing in real time — that’s the order book.
Understanding it is the difference between guessing and knowing what’s happening in the market.
In this guide, you’ll learn:
- What order books and market depth are
- How bids, asks, and spreads actually work
- How to read market depth charts
- What “liquidity walls” mean
- How professional traders use this info
- Real examples from exchanges like Bybit
Let’s make sense of all those green and red numbers 👇
What Is an Order Book? 📘
An order book is a live list of all buy and sell orders for a crypto asset — like Bitcoin or Ethereum — on an exchange.
It shows who wants to buy, who wants to sell, and at what price.
| Term | Meaning |
|---|---|
| Bid | A buy order (what buyers are willing to pay) |
| Ask | A sell order (what sellers are asking for) |
| Spread | The difference between the highest bid and lowest ask |
For example:
| Price (USDT) | Amount (BTC) | Side |
|---|---|---|
| 67,800 | 0.75 | 🟥 Ask |
| 67,790 | 0.45 | 🟥 Ask |
| 67,780 | 1.20 | 🔶 Spread midpoint |
| 67,770 | 1.10 | 🟩 Bid |
| 67,760 | 0.60 | 🟩 Bid |
The closer bids and asks are to each other, the more liquid the market is — meaning it’s easier to buy or sell without big price swings.
💡 Lanzo Tip: Tight spreads usually mean higher liquidity and less slippage — that’s why pro traders prefer exchanges with deep order books like Bybit.
What Is Market Depth? 🌊
Market depth shows how much liquidity (buy/sell volume) exists at different price levels.
It’s a visual representation of the order book — typically seen as a green (buy) and red (sell) chart.
When you open a Depth Chart on Bybit, you’ll see:
- Green curve (bids): how many buy orders are below current price
- Red curve (asks): how many sell orders are above current price
- The midpoint — current market price
If the green area is much larger, buyers dominate.
If the red area is bigger, sellers dominate.
⚠️ Lanzo Warning: Large buy/sell “walls” don’t always mean real demand — sometimes they’re fake orders (spoofing) to manipulate traders.
Understanding the Bid-Ask Spread 💰
The bid-ask spread is a key indicator of market health.
It’s the gap between the highest price a buyer will pay and the lowest price a seller will accept.
Example:
- Highest Bid: $67,770
- Lowest Ask: $67,780
- Spread = $10
In high-volume coins (BTC, ETH), spreads are often tiny (under 0.01%).
In low-volume coins, spreads can be huge — meaning less liquidity and higher risk of slippage.
How to Read Order Flow 📊
Each line in the order book updates constantly.
Here’s what traders watch for:
| Indicator | Meaning | What It Tells You |
|---|---|---|
| Big buy wall | Many bids at one price | Buyers are defending that level |
| Big sell wall | Many asks at one price | Sellers want to take profit there |
| Rapidly moving walls | Orders disappearing | Manipulation or bot activity |
| Tight clustering | Bids/asks close together | Stable and liquid market |
| Gaps | Empty price zones | Potential breakout levels |
When a large buy wall disappears — price often drops.
When a large sell wall vanishes — price can pump.
⚡ Lanzo Tip: Watching order book dynamics helps you anticipate short-term moves, not just react after they happen.
Order Types and Execution 🧾
When you trade on Bybit or any CEX, there are 3 main order types:
| Type | Description | Example |
|---|---|---|
| Limit Order | You set your price | Buy BTC at $67,500 |
| Market Order | Executes instantly | Buys at current best price |
| Stop Order | Triggered by price | Sell if BTC drops to $67,000 |
Limit orders appear in the order book.
Market orders consume existing orders — moving price slightly.
Example: Reading a Bybit Order Book 🧠
Let’s say BTC/USDT looks like this:
| Price | Amount | Side |
|---|---|---|
| 67,900 | 5.2 | Ask |
| 67,850 | 4.0 | Ask |
| 67,800 | Current Price | 🔸 |
| 67,750 | 3.8 | Bid |
| 67,700 | 6.5 | Bid |
Interpretation:
- Buyers are strong near 67.7k
- Sellers are heavy around 67.9k
- Price likely stays between these two until one side breaks
If the 67.9k wall is cleared by market buyers — expect a short-term breakout.
Using Market Depth in Your Trading Strategy 🧩
Market depth helps you:
- Identify support/resistance zones before charts do
- Spot whale activity (large limit orders)
- Avoid liquidity traps (thin books = big slippage)
- Confirm momentum (buyers/sellers adding or removing liquidity)
💡 Lanzo Tip: Combine order book data with technical analysis (like RSI or volume spikes) for higher-accuracy entries.
Advanced Concept: Order Book Imbalance ⚖️
Imbalance means there’s more volume on one side of the book than the other.
Imbalance = (Buy Volume - Sell Volume) / (Buy Volume + Sell Volume)
If result > 0, buyers dominate.
If result < 0, sellers dominate.
Example:
Traders use imbalance data to gauge short-term direction or fake walls being pulled before a move.
Common Mistakes Beginners Make ❌
- Chasing large walls — they can vanish in seconds.
- Ignoring liquidity gaps — leads to massive slippage.
- Using market orders in thin books.
- Forgetting about trading fees.
- Not watching both order book and chart together.
TL;DR 📌
- Order book = live list of buy/sell orders.
- Market depth = visual liquidity chart.
- Bid-ask spread shows market efficiency.
- Buy/Sell walls indicate potential reversal zones.
- Use this info with TA for more confident trades.
- Always confirm with volume and price action.
FAQ
A list of all buy and sell orders on an exchange, showing real-time market demand and supply.
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⚡ Lanzo Tip: Don’t just watch the chart — read the order book. That’s where the real story happens before the candle moves.
⚠️ This post is for educational purposes only and does not constitute financial advice.
(This post contains affiliate links — supporting Lanzo at no extra cost to you.)
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