Cryptocurrency Exchanges are rapidly experiencing increased popularity in recent years. The giant trading platforms like Binance, Coinbase, Localbitcoins have profited to a greater number with most of the users started to trade on the platform.
One of the features in Crypto Exchanges is the Order Book. Most of the entrepreneurs who have an idea of launching a trading platform should consider this initially. As users expect ease of trading and fruitful experience, an order book can determine the factor of how one can buy or sell digital assets on the exchange.
The project aims to build a trading platform and is supported, among others by billionaire VC fund Tim Draper.
This blog discusses the importance of the Order book and why it has to be integrated into the crypto trading platforms.
Order Book Exchange:
An Order Book is a ledger that contains all the orders from the traders to buy or sell cryptocurrencies and assets. An order to buy is termed to be “Bid” while an order to sell is termed to be “Ask”. Bids and asks will be paired once the requirements are fulfilled.
Thus, all the trades which are executed on the exchange platform get recorded in the order book. This allows one to measure liquidity when they place the buy and sell order in the exchange.
Order books are almost used by all types of exchanges for various assets which include Bitcoin, Altcoins, Utility & Security tokens, stocks, bonds, etc. Although they generally contain the same information, the set up may slightly vary depending on the source.
These lists are not only useful for traders but also enhances market transparency. The reason is they provide all sets of information. Such as:
- The price
- How many shares are available?
- Who wants to initiate the transaction
And much more!
An exchange with Order Books lists all the orders as they are placed by the users. It lists the entire set of orders which are so far placed as well the ones which are in the queue. Thus, by creating a crypto exchange with a top-notch Order Book Exchange, the owner of the platform can leverage the benefits.
Working of an Order Books Exchange:
The Order Book helps traders make more informed trading decisions. They can see which brokerages are buying or selling stocks, and determine whether market action is being driven by retail investors or by institutions.
An Order Book is dynamic and constantly updated every time throughout the day. There are basically three types of orders in an Order Book. They are:
- Buy Orders
- Sell Orders
- Order History
The Buy Orders contain all the information about the buyers in the market. It provides the following set of information:
- The amount they wish to purchase
While in the case of Sell Orders, they resemble Buy Orders. Finally, the order history displays the history of orders that happened in the exchange platform.
At the top of the book, one can find the list of highest bids and lowest ask prices. Once they are matched, orders get executed.
Types of Orders in a Crypto Exchange:
- Market Orders
Market Orders are used to buy or sell crypto’s at the best available price at a specific duration of time. A Market Order executed within seconds of placing the order. This is a go-to order when the traders give more weight to the order which has to be executed at a certain time rather than at a certain price.
This remains to be the most simple and straightforward order to buy or sell the stock. Traders can buy or sell the assets instantly at a reasonable cost. Moreover, they don’t require additional time or money limitations.
Assets with a high trading volume process them immediately. While other assets have to wait for processing.
- Limit Orders
Limit Orders act exactly opposite to Market Orders. This means that traders can buy or sell virtual currencies at a specific price rather than time. Limit Orders are executed when the price of the selected coins reaches the specified price.
Thus, this order can be executed at a set limit price or lower or higher. For instance, if a trader’s Buy Limit order is set to $100, the trader can purchase the crypto assets only within $100 or lower.
However, one cannot guarantee the Limit orders to be executed since the market has to hit the price for processing.
- Stop-Limit orders
A Stop Limit Order is one that is executed within a specific price range and not as a market order. This is a conditional trade to buy and sell crypto that acts to stop any loss over a set limit price.
This feature is beneficial in eliminating additional losses and is a secure way to automate orders without constantly watching the market. They are intended to bring in luck and profits and act as a valuable tool to manage the risks.
Benefits of Exchanges with Order Book:
Most of the investors believe the present to be the perfect time to invest in Blockchain. As the industry is seamlessly getting new concepts every day, it remains helpful for the traders out there. One such thing is the Exchanges with Order Books.
Crypto Order Book data contains a variety of use cases in the industry. While historical orders books can be used to simulate the past market environments. They are ideal for backtesting strategies or researching the statistics of sellers and buyers. In addition to this, Order Books also helps to understand the currency pair’s potential support.
Other mandatory features in a Crypto Exchange:
- Ads Based Exchange
The term Ad based Exchange refers to the online marketplace where the advertising space is brokered and auctioned. The sale is based on an automated process that calculates the price of the advertising space and inventory.
On an Ad Based Exchange, thousands of publishers can make unsold ad space inventory which is available for advertisers to bid on automatically. The buying and selling happens seamlessly between software platforms. Here the advertisers can target audiences from a specific demographic area who have a keen interest in the product.
- User to Admin Exchange
As the name implies, these exchanges come with an Admin Panel to facilitate the transactions. The exchange is designed in a manner that it comes with full functionalities that allows one to easily manage the system.
The Admin will verify the identity and KYC Documents. In addition to this, the following set of details can also be viewed:
- The Balance in each currency
- Open & Closed Orders
- Transaction History
Hence, when users place orders in the trading platform, the Admin of the exchange is responsible to approve or decline the request and facilitate the transactions. Even most of the Security Token Exchange has integrated this type of feature for safe transactions.
- Binary Options Trading Platform
Binary Options feature allows traders to earn profits from price fluctuations in the global market. However, it is important to understand the risks and rewards from the other end. This can be a great choice for low skilled traders in the industry.
These Binary Options are an investment that works like predictions that can either go right or wrong. An investor bets a given asset at an above or below point after a certain amount of time.
The era of cryptocurrency exchanges is still expected to uprise in the future years. With more technical concepts such as Centralization, Decentralization, Hybrid being entering the market, we can figure out them to stay here! With the enhancement of traders, we can expect the proprietors of the exchange to reap profits!