Order Book Analysis: Read Liquidity Like a Pro
The order book shows you where liquidity sits, where big players are positioned, and where price is likely to find support or resistance.
- Order book shows all bids (buys) and asks (sells). Walls indicate liquidity clusters—potential support/resistance.
- Beware spoofing: walls can be pulled. Watch for absorption (wall being eaten) as strong directional signal.
- Thrive visualizes order book depth and alerts when significant walls form at key levels.
Explore Order Book Patterns
Click through common order book patterns:
Large buy orders stacked at a specific price level creating a visible "wall" of bids.
How to Read
Big green cluster in order book depth. Large bid size at one price. Often at round numbers or key technical levels.
Strong support level. Price unlikely to break below easily. Good level for long entries with stop just below wall. But beware—walls can be pulled (spoofing).
What Is an Order Book?
The order book is the raw market structure. It shows all pending buy orders (bids) and sell orders (asks) at every price level. Before a trade happens, it exists as an order in the book. Understanding the book means understanding where supply and demand live.
Bids are on one side (buyers waiting below current price). Asks are on the other (sellers waiting above). The spread between best bid and best ask is where the market "lives."
Reading the Order Book
Bid Walls (Support)
Large buy orders stacked at a price level. Creates visible "wall" of support. Price unlikely to easily break below—buyers absorb selling. But walls can be fake (spoofing).
Ask Walls (Resistance)
Large sell orders creating resistance. Price may struggle to break through. If wall is absorbed (eaten by buyers), very bullish. If wall stands, resistance holds.
Imbalances
Much more liquidity on one side than other. Heavy bids with thin asks = bullish pressure. Heavy asks with thin bids = bearish pressure. Imbalances often resolve in direction of pressure.
| Pattern | Meaning | Signal | Reliability |
|---|---|---|---|
| Bid Wall | Support level | Potential bounce | Medium (can spoof) |
| Ask Wall | Resistance level | Potential rejection | Medium (can spoof) |
| Absorption | Wall being eaten | Strong directional | High |
| Wall Pull | Spoofing | Fakeout | Low (deceptive) |
Order Absorption
The most reliable order book signal. Absorption happens when aggressive market orders eat through a wall without price moving. You see the wall shrink while price stays flat.
If ask wall is absorbed: hidden buyers are accumulating. Very bullish. If bid wall is absorbed: hidden sellers are distributing. Very bearish. Absorption shows real intent, not just placed orders.
Related: Tape Reading Guide
Spoofing & Manipulation
Not all walls are real. Spoofing is placing large orders with intent to cancel before execution—making market appear to have support/resistance that doesn't exist.
Spotting Spoofs
- Wall appears suddenly, disappears as price approaches
- Wall at round numbers (psychological manipulation)
- Illiquid pairs more susceptible
- Watch if wall stays when price gets close—real walls don't pull
Don't trade based on walls alone. Wait for confirmation from actual trades.
Trading with Order Book
Entries
- Long entry: below significant bid wall (wall as stop protection)
- Breakout entry: when ask wall is being absorbed
- Don't chase walls—wait for price to reach level first
Stops
- Place stops beyond walls for protection
- Remember walls can pull—don't rely solely on wall
- Use actual price levels with wall confluence
Size and Slippage
- Check depth before sizing—thin books = slippage
- Large orders should use limit orders, not market
- Factor slippage into position sizing
Common Mistakes
- Trusting walls blindly: Walls can be fake. Always wait for confirmation.
- Ignoring absorption: The most reliable signal gets overlooked.
- Over-relying on book: Use as context, not sole decision maker.
- Not checking depth: Thin books + large order = massive slippage.
Frequently Asked Questions
What is an order book?
Order book shows all open buy (bid) and sell (ask) orders at different prices. It displays market depth—how much liquidity exists at each price level. Foundation of price discovery in trading.
What is a bid wall?
Large cluster of buy orders at a specific price creating visible "wall" of support. Often at round numbers or key levels. Can indicate strong support—but beware of spoofing.
What is an ask wall?
Large cluster of sell orders creating resistance to upward movement. Price may struggle to break through. If broken with volume, can be bullish signal. Watch for absorption.
What is spoofing?
Placing large orders with intent to cancel before execution—manipulating perception of supply/demand. Walls that appear then disappear as price approaches. Common on less regulated exchanges.
What is order absorption?
When large order (wall) is being filled by aggressive market orders. Wall shrinks while price stays flat. Indicates hidden buying/selling. Strong directional signal.
Should I trade based on order book alone?
No. Order book can be manipulated (spoofing). Use as additional context with price action and volume. Walls can disappear instantly. Confirmation from actual trades is more reliable.
What is market depth?
Total volume of orders at various price levels. Deep book (lots of orders) = harder to move price, less slippage. Thin book = easy to move price, high slippage. Important for position sizing.
How do I use order book for entries?
Look for bids to place long stops below. Look for absorption of ask walls for breakout entries. Watch for walls pulling (fakeout) before committing. Confirm with tape/volume.