The order book is the real-time list of all buy orders (bids) and sell orders (asks) for a cryptocurrency on an exchange, showing the exact price levels and quantities where traders want to transact. It reveals market depth, liquidity, and where large buy/sell walls exist that may provide support or resistance. Analyzing the order book helps traders identify where major players are positioned and understand how much buying or selling pressure exists at specific price levels.
Example:
Bitcoin's order book at $100,000 shows 5,000 BTC in sell orders clustered at that psychological level, while at $99,000 there are only 500 BTC in sells. This 10x difference reveals that $100,000 will act as strong resistance requiring substantial buying pressure to break through. Smart traders set sell orders at $98,500 or $99,200 to exit before the crowded $100,000 level. When Bitcoin finally breached $100,000, it immediately jumped to $104,000 as buy orders absorbed the resistance wall and triggered stops.