How exactly are market forces reflected and calculated in an exchange’s order book?
Payments
Asked by Question Bot12/Jan/20141 answer
1 Answer
F
Faisal Khan
Answered 12/Jan/2014
From the Order Book. Buyers and Sellers both post (or shout as Joseph Wang said) the price they are willing to Buy (or Sell) and the Quantity.
When a trade happens, for example, someone is selling 1 BTC at $800 and another one agrees to buy 1 BTC at $800 the market trade of $800 would be reflected for all to see. This is the first "tick", this in turn becomes the benchmark for further orders that are entered into the Order Book.
Buyers and Sellers will then start posting more orders into the order book. You might see something like this (as extracted from Bitstamp.net)
Based on the above, and how fast and in which direction (up or down) the BTC price tick is going, people will start trading.
The more the people trade the less of an influence each has on the exchange. More trades (or trade volume) is also good, because it means there is greater liquidity in the market for trading of your Bitcoins (buy or sell).
When a trade happens, for example, someone is selling 1 BTC at $800 and another one agrees to buy 1 BTC at $800 the market trade of $800 would be reflected for all to see. This is the first "tick", this in turn becomes the benchmark for further orders that are entered into the Order Book.
Buyers and Sellers will then start posting more orders into the order book. You might see something like this (as extracted from Bitstamp.net)
Based on the above, and how fast and in which direction (up or down) the BTC price tick is going, people will start trading.
The more the people trade the less of an influence each has on the exchange. More trades (or trade volume) is also good, because it means there is greater liquidity in the market for trading of your Bitcoins (buy or sell).