How to use market depths for better trading solutions
The cryptocurrency trading world is known for its high variability and high market conditions. When the decentralized stock exchanges (DEXS) and Altcoins are growing, traders are exposed to complex and technical movement in the markets efficiently. One of these tools that has been paid in recent years is the analysis of the depth of the market.
Market depth means the liquidity level provided by the cryptocurrency exchange. This measures the number of orders purchase and sale in each pair of assets, as well as the average size of these operations. In other words, market depth helps traders determine the likelihood of finding a buyer or seller at a certain price.
** Why is the depth of market
Traders have a great depth on the market as it provides valuable insights on the basis of the essentials of the cryptocurrency exchange. After analyzing the depth of the market, traders can make more informed trading decisions and avoid expensive mistakes that can cause major losses.
Here are some advantages of using the main market depth in cryptocurrency trading:
Increased self -confidence : Market depth analysis helps merchants assess the reliability of the liquidity of exchange. If the market is very liquid, it indicates a more stable and reliable trading environment.
* Better risk management : Realizing the level of market depth, traders can set a more accurate suspension level and adjust their position accordingly. This reduces the likelihood of significant losses due to market volatility.
* Improved position size : Market depth analysis allows traders to evaluate the size of possible operations, taking into account the average changes in a certain couple. This helps them to provide capital more effectively and avoid excessive risk.
How to use market depths for better trading solutions
To use market depth analysis as much as possible, do the following:
Select a reliable exchange : Not all cryptocurrency exchange provides accurate market depth data. Look for those who have a strong reputation, durable infrastructure and transparent price models.
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Use technical indicators
: Use technical indicators such as relative strength index (RSI) and change the average convergence deviation (MACD) to analyze the depth of the market in real time.
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Example of market depth chart
Here are the example of market depth charts using historical data:
| Active to buy price to sell the price average size
| -------
| BTC / ETH | 3500 4100 -100
In this diagram, the average purchase and sale order is $ 400 in each pair. This shows a high level of liquidity, which shows that buyers want to pay a bonus for Bitcoin (BTC) and sellers can offer for about $ 410.
Conclusion
Market depth analysis gives merchants a valuable insight into the liquidity of the cryptocurrency stock exchange. Understanding the depth of the market, traders can make more reasonable decisions and improve their overall trade strategy. Remember to choose reliable exchange with accurate market depth data, use technical indicators to analyze market depth, set alarms for main couples, monitor market depth charts and combine these tools with other basic analysis methods to optimize trading indicators.