Question about cryptocurrencies prices variation with buy/sell orders

[lozi_dani]

Hi everyone! I'm new here, and in the cripto trading. I've been reading a lot about how this world works and is really exciting. I've prepared my own strategy, and now I am trying to test it and adjust it until it is prepared to be used. My question is the following:

I've prepared which indicators I will use in my strategy and the values I'm going to specify on them (Bollinger, RSI, EMAs, etc.), and one of the parameters I want to check to make decisions is the Orders Book (I'm using Binance as Exchange). According to the theory (knowing that here the theory is not all), the offer/demand law basically says that if there is a lot of demand of a specific active, its prices starts to get high, but if there is a lot of offer for that active, the price starts to go down (as there is more active available in the market). One thing I've seen is that sometimes, it doesn't matter how much offer or demand there is about an active, and I can see how the price of a coin can increase despite of there is more offer than demand of that coin in the market. Is that a common behavior? How it is related here the value of a crypto with the offer/demand there is in the market about it? How much weight has the Orders Book in the variation of the price of a coin?

Any idea or related info about this would be great! Sorry if my question is very basic... everybody starts from the beggining 

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[1715321255]

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[semobo]

If demand increases the price will be increased as well, if you are seeing a high buy order or low sell order than actual Market price then someone placed order wrongly or some whale is trying to manipulate the market with huge orders.

[lozi_dani]

Thanks semobo! then I guess it should behave as the theory says... What I can see in the Orders Book in Binance (Desktop application) is the average price, the sum (in money) of the operations in the corresponding crypto, and the sum (also in money) of the operations in USDT. What I compare is how much money of the crypto is in the sell orders book with how much there is in the buy orders book. To put an example, for me, if I see that in Bitcoin there is an amount of 100k (USDT value) in the sell orders book, and 110k in the buy orders book, then I guess that there is more demand than offer. Would be that correct? Or maybe I am trying to focus my analysis in that values, butare not the correct ones to check the offer/demand of that coin?

[Upgrade00]

How much weight has the Orders Book in the variation of the price of a coin?

Order books determines the price of a coin on an exchange, more specifically, the most recent taken order is the displayed price on that exchange, up till the next one. Coin trackers like CMC and coingecko aggregate different prices on different exchanges to determine their price.
If i take an sell order for $49550.67, that would be the price on that exchange till the next trade is completed.

If I see that in Bitcoin there is an amount of 100k (USDT value) in the sell orders book, and 110k in the buy orders book, then I guess that there is more demand than offer. Would be that correct? Or maybe I am trying to focus my analysis in that values, butare not the correct ones to check the offer/demand of that coin?

I guess it will depend on the number of traders on both sides and the legitimacy of the trades;
By number of traders, I mean the number of buyers and sellers and it influences demand and supply,
By legitimacy of trades, I am referring to if the order is one that is plausible to be taken, for example, if I put a sell order for 1BTC at $112,222 it is an order that is unlikely to be taken as it is far off from the current price and does not reflect actual demand.

[suzanne5223]

One thing I've seen is that sometimes, it doesn't matter how much offer or demand there is about an active, and I can see how the price of a coin can increase despite of there is more offer than demand of that coin in the market. Is that a common behavior?

Yes, it is a common behavior, the price of the market is determined by the trading decision of the last trader who's her trading was executed and that's one of the reasons why the crypto market is volatile.

How it is related here the value of a crypto with the offer/demand there is in the market about it?

Crypto price is determined by the level of supply, demand, and some established trends (Bitcoin halving). Just like in the real world market when there's demand for an item then offer the price of the item will go up.

[webtricks]

Thanks semobo! then I guess it should behave as the theory says... What I can see in the Orders Book in Binance (Desktop application) is the average price, the sum (in money) of the operations in the corresponding crypto, and the sum (also in money) of the operations in USDT. What I compare is how much money of the crypto is in the sell orders book with how much there is in the buy orders book. To put an example, for me, if I see that in Bitcoin there is an amount of 100k (USDT value) in the sell orders book, and 110k in the buy orders book, then I guess that there is more demand than offer. Would be that correct? Or maybe I am trying to focus my analysis in that values, butare not the correct ones to check the offer/demand of that coin?

Merely comparing the volume on the buy and sell sides is not the best way to determine the market trend. I can put a huge buy order, let say 20% below the last trade price. It will increase the volume on the buy side but it doesn't mean my order will result in bullish price trend. People mostly use order-book to determine the support and resistant level and design the limit order strategy accordingly.

The comparatively better indicator of price trend is the volume of trades executed. It is indicated using a bar diagram immediately below the price line on the chart. There can be 4 indicators - 'rising price with increasing volume', 'falling price with increasing volume', 'rising price with decreasing volume' and 'falling price with decreasing volume. Each one of these reflects different price trend, you can explore more about it.

[KingsDen]

One thing I've seen is that sometimes, it doesn't matter how much offer or demand there is about an active, and I can see how the price of a coin can increase despite of there is more offer than demand of that coin in the market. Is that a common behavior? How it is related here the value of a crypto with the offer/demand there is in the market about it? How much weight has the Orders Book in the variation of the price of a coin?

I rely on the Order Book to know the availability as per volume and maybe the depth of trade. With that information, I'll watch the candle sticks to know the history of that particular market, compared to the present. With these my decision is made.
I do not depend on the order Book to know demand and supply because there are alot of manipulations behind the scene.
When you come to realise this knowledge, you will know the essence of a dark pool.

[GeorgeJohn]

If demand increases the price will be increased as well, if you are seeing a high buy order or low sell order than actual Market price then someone placed order wrongly or some whale is trying to manipulate the market with huge orders.

The Genesis of it is the demands and supply, but kingsden has said it and that really impressed me, because in trading your focus and attention have to be determine through your chart, so the chart is like a navigator, because the moment of the candle stick will make you to come in conclusion of what you want to do, if probably you get yourself at higher order and lower order..so it absolutely encouraging to get perfect knowledge of Cryptocurrencies chart of market situations before you could make a reliable decision.

[odolvlobo]

According to the theory ..., the offer/demand law basically says that if there is a lot of demand of a specific active, its prices starts to get high, but if there is a lot of offer for that active, the price starts to go down (as there is more active available in the market). One thing I've seen is that sometimes, it doesn't matter how much offer or demand there is about an active, and I can see how the price of a coin can increase despite of there is more offer than demand of that coin in the market. Is that a common behavior? How it is related here the value of a crypto with the offer/demand there is in the market about it? How much weight has the Orders Book in the variation of the price of a coin?

One thing to remember is that supply (or offer as you call it) and demand are not numbers (even though people talk about them as if they are). They are curves. Where and when they intersect, there is a trade. Any change in the supply or demand in the parts of the curves that don't intersect have no effect on the price.

[Smartvirus]

The idea behind every business is to make profit. Despite the fact that, the law of demand and supply plays a role in price determination, there is never an equal price value for a buy and sell other. Crypto have proven to reward those who can hodl and even with a constant supply of crypto coupled with a demand for it, crypto users aren't desperate to sell below the market price at any particular time. Offering a coin for sell is always aimed at buying from the dip.

One thing to remember is that supply (or offer as you call it) and demand are not numbers (even though people talk about them as if they are). They are curves. Where and when they intersect, there is a trade. Any change in the supply or demand in the parts of the curves that don't intersect have no effect on the price.

Good point, this outlines the point of transaction in a crypto market.

[Husires]

The law of supply and demand is the ruler, but you look at the wrong part of supply and demand. What you are looking at is a small part of the whole market, and therefore it does not matter the amount of supply and demand inside the platform if it is possible to deposit and withdraw quickly.

For example, if the price rises in many platforms, the price will start to rise in other platforms because they have a future view of the price, and if the price does not rise, the demand will increase because the price of Bitcoin here is cheaper and it will be an opportunity to make some profit for trading between platforms.

Speed of updating orders, buying and selling orders and withdrawing from the platform will reduce manipulation.