← Back to Academy
understanding-order-books

Reading the Order Book: Spotting the Real Moves

📅 Dec 24, 2024✍️ Poly Team⏱ 15 min read

If you want to move beyond being a "vibes" trader and start acting like a professional, you have to learn how to read the order book. The price chart tells you where the market was, but the order book tells you where it is going. It’s the raw, unfiltered record of every buyer and seller currently standing in line to trade.

The Basics: Bids and Asks

At any given moment, the "price" you see on the screen is just the last transaction that happened. But behind that number is a battleground:

  • The Bid (The Floor): This is the highest price someone is willing to pay right now. If you want to sell your shares instantly, this is the price you’ll get.
  • The Ask (The Ceiling): This is the lowest price someone is willing to sell for. If you want to buy instantly, you’re paying the ask.
  • The Spread: The gap between the bid and the ask. In high-volume markets, this spread might be 0.1¢. In "ghost town" markets, it could be 5¢ or more. Don't trade in markets with wide spreads unless you have a massive edge.

What "Market Depth" Actually Tells You

Most beginners just look at the price. Pros look at the "depth map." This shows you how many shares are sitting at each price level. If you see a $50,000 "buy wall" at 45¢ and only $2,000 of "sell pressure" up to 55¢, the path of least resistance is upward. The big money has set a floor at 45¢, effectively saying "we won't let it go lower."

How to Spot "Spoofing"

Be careful: big traders sometimes put up massive orders just to scare the market, then cancel them before they ever get filled. This is called spoofing. If you see a massive order that keeps moving every time the price gets close to it, it’s probably a fake. Real orders want to be filled; fake orders want to be seen.

The Psychology of the Tape

When you watch the "recent trades" list (often called the tape), look for speed. If you see five small "Yes" buys followed by one massive $10,000 "Yes" buy, that’s a signal. Small retail traders are clicking buttons, but a "whale" just took a position. On Poly Hawk, our Whale Alerts are designed to catch exactly these moves so you don't have to stare at the tape 24/7.