How to Read And Use Buy And Sell Wall Strategy In Cryptocurrency Trading
Cryptocurrency trading involves a substantial number of strategies, trading indicators and signals which includes a buy and sell wall strategy. The full-time cryptocurrency traders who invest or hold a significant number of a particular crypto coin have the power to influence the prices of that particular cryptocurrency. Also known as “whales”, these cryptocurrency investors try to control the price of that crypto coin and allow it to reach a certain level such that they acquire more and more profits.
Breaking Down “Buy And Sell Wall Strategy”
The manner in which a cryptocurrency transaction is facilitated often decides the buy wall or the sell wall decisions. A large number of cryptocurrency transactions are conducted through an order book. In the order book the trader has to first indicate the price at which s/he wants to buy or sell the crypto asset and the number of units they are rooting for. There are two ways of doing this. The trader can call for the price when the transaction is initiated. Otherwise, they can vote for a future time. In this case, the trader has to place an order stating the number of units and the price at which s/he wants to buy/sell and then wait for the order to be activated when the price of the cryptocurrency reaches the stipulated price. Suppose a trader wants to buy 20 units for $8 when the currency trades at $10 then, s/he will be able to place an order beforehand and it can be matched with a willing seller.
A whale can ‘intrude’ and put a wall by placing a large order. Following the above example, the whale can place an order of say, 15,000 units at $10 such as to prevent the price of the cryptocurrency to drop below $10. So, the situation now requires the sellers to compile 15,000 units for $10 or else the price would not drop below the currency trade price. The intrusion of the whale thus effectively prevents the drop of the price.
A Brief Description of “Order Book”
The order book as seen in the previous paragraphs plays a crucial role in the creation of buy wall and sell wall strategy. The order book is simply a list of buy and sell orders for a specific crypto coin or a crypto asset. It is organised according to the buy/sell price stipulated by the cryptocurrency traders. The buy orders are marked by green colour while the sell orders are marked by red colour. It needs to be constantly updated in the real time and is a great way to study the movement of the price and the fellow traders’ take on the present cryptocurrency market. The order book also mentions the Open price and the Close price of the cryptocurrency.
The cryptocurrency trader can thus see the price at which the broker websites are buying or selling the crypto assets and the number of units. Order imbalances can also be observed in the order book. A crypto asset’s future support and resistance levels can be determined to a certain extent by studying the order book. If there are more buy orders than sell orders then, it may indicate towards an uptrend. A cluster of huge sell orders are more likely to suggest the level of resistance. Unfortunately, the order book does not show the batches of hidden orders (known as dark pools) that are usually maintained by the big players. They remain hidden because they simply do not want the other traders to track their moves and make profits by blindly following them.
The presence of the dark pools in an order book in fact, can be quite exacerbating as it is difficult to know whether they represent true supply or demand of the crypto assets. All in all, the order book has proven to be crucial in trading the cryptocurrencies as the shrewd trader can find out the support and resistance levels and place their order after studying those of other traders. Combining the knowledge gathered ferom the order book with technical analysis will increase the number of profits. If the trader is into short-term cryptocurrency trading then s/he must refer to the order book as it great to make short profits here and there, which when combined may stand out to be a larger profit.
More on Buy Wall Strategy
The whale usually places a buy wall when the size of the buy orders is considerably higher than the sell orders for a particular crypto coin. The taller the buy wall is, the more advantageous it proves to be. For the traders, it assures the current state of the crypto coin. This simply influences the trades to call more Buy than Sell. In fact, there is a rush to buy all cheap orders. Once the orders have been purchased, the buy orders rapidly lead to increase in price point. A cryptocurrency that has a positive sentiment is highly beneficial for the short-term or day traders. It increases their chances of making profits. If such traders do not follow this path then, they have high chances of losing the game. Therefore, it is crucial to trade a crypto coin that already has a positive sentiment.
More on Sell Wall Strategy
The Sell Wall strategy is created in situations opposite to the circumstances leading to the creation of the Buy Wall. The sentiment here is negative. A wider sell wall is much more effective than a narrow one. The sell wall is an indication for the traders to sell the crypto assets. The highest buy order in the order book is filled first and then the lowest order is fulfilled. In this way all the orders in the order book are filled out. The neophyte traders are always advised to not to buy crypto coins when they see a huge sell wall. It can be easily understood that the sell orders dominate the cryptocurrency market at the moment. Creating a sell wall strategy is also often a strategy of the whales to buy the crypto coins at a considerably lower rate.
As briefly mentioned before, the whales refer to the big cryptocurrency holders. The term holds true as these players have the power to control the cryptocurrency market just as the creatures of the ocean dominate the area with their large size. The cryptocurrency whales can make or break the smaller altcoin markets especially when the liquidity is less. The whales can manipulate the market using multiple tactics like the ‘rinse and repeat cycle’. This strategy is highly profitable for the Bitcoin whales and timing it correctly is crucial to a successful trade. The whale usually starts by selling the bitcoins at a considerably lower price (lower than the market price) which quite naturally creates a panic among the small-time traders. The whale then patiently waits for the price of the Bitcoin to fall and then accumulates more Bitcoins as fast as possible at a much lower rate. Another way of dominating the market is the Buy and Sell Wall Strategy. The article elaborates on this strategy.
The Statistics Behind Buy And Sell Wall Strategy
The creation of the buy wall or sell wall strategy is not specifically dependent on one trader. Once a large buy or sell order is placed, other traders also place their orders at the same price point usually. This leads to the development of the wall. Thus, it can be noted that the manipulation of prices often comes from the investors themselves. The buy and sell wall strategy is not like other trading strategies as it appears to emerge only when someone (a whale) intends to manipulate the market of the cryptocurrency. The sell walls usually signify liquidity of the crypto market. Liquidity is a good omen for the cryptocurrency market as it indicates that a significant number of coins are available for purchase. The demand for Buy also increases as without the buy options there is no point in putting up active sell orders. Setting up a buy wall will also attract the traders who are looking to sell off their crypto coins.
In some of the cases of large buy or sell orders, the orders generally last for a short period of time and then disappear completely. The existence of the walls is also dependent on how the market reacts to the creation of these walls.
Fake Buy Sell Walls! What are they?
The cryptocurrency traders who are considering day trading or short-term trading needs to cautiously approach the market as the walls may often turn out to be fake. Many whales may try to manipulate the cryptocurrency market. Such traders or investors will place a buy or sell order at a point that is excessively wide that it becomes difficult to fill that order. The order thus remains unfulfilled and this results in the wall being termed as the fake wall. But, this also leads to creation of more ambitious traders as the whales can set the future ceiling for the price of that particular cryptocurrency.
The fake walls can be recognised by their exceptionally taller and wider appearance. Generally, the fake walls do not feature a price runway. The popular crypto exchanges generally show them as the highest buy order and the lowest sell order. Another reason to name them “fake walls” is that the whale may remove the order at any time s/he wishes. The trader will try to influence other traders to follow the direction such that the movement of the price of that crypto coin will be towards the sentiment. The Buy and Sell walls lend confidence to the cryptocurrency traders especially the beginners. They are even led to believe that the current price points are the current new floor. This will lead to the appearance of a certain number of buy orders on the wall.
We know that the whales can remove their order without any notice. The order of the whale can thus shift the price of the cryptocurrency quite rapidly in either direction. The traders who also intend to experience the pump as well has to be much more careful or else they may lose more money. The fake sell walls and the buy fake walls are quite similar in this way. If the whales create a wall with the intention of buying a particular coin at a remarkably low rate then, they usually create a sell wall strategy. As soon as they collect enough crypto coins they may remove the walls. This usually results in a surge of the cryptocurrency price in the upward direction (if the sentiment was generally positive). This is just way the whale tricks the traders into selling their coins at a much lower rate.
The whales also use the Buy and Sell Wall strategy to find pumpable coins in order to perform pump and dump actions. The pump and dump method can be profitable to the traders that detect the pump at an early stage. Those who find the pump later it can lead to a massive loss. The bigger investors usually look for low volume shitcoins that have a very low number of sell orders as the pumpable coins require minimal support to increase. The beginners are advised to avoid such scenarios as they may end up losing the crypto coins very badly.
How To Detect A Fake Buy Sell Wall
Suppose LTC is currently showing a bullish trend and is in high demand. The bigger investors (whales) are now interested to purchase LTC at the best price. For this they have invested a large amount of BTC to scare other traders. This way they are creating fake sell walls and thus pushing down the price of LTC such that they can purchase the crypto coin at a much cheaper rate. Once the price of LTC has gone down and they have purchased the coin, the whales are more likely to remove the walls. It is thus quite easy to manipulate the cryptocurrency market as the market is young and still developing. The manipulation can be done by anyone who has enough funds. One way a simple trader can benefit from the fake walls is by simply following the money of the whales and then buying the dip. It is also easy to distinguish a fake wall from a wall made by the professional whales.
The fake sell wall does not mean that a trader will profit if s/he simply places a buy order as the price usually surges after the wall is taken down. Sometimes, the opposite has proven to be true. In all, it is quite dangerous to trade the crypto coins during this period as the movement is price is ‘artificial’. Sometimes, the trader may make a profit but it would simply be stupid to do the trades by completely trusting their own luck. The trader should always aim for real market sentiment in order to grow their trades and increase their profits. It is essential to be patient as the growth may often be slow but steady.
Using The Sell Wall Strategy To The Trader’s Benefit
It is a fad that the sell walls are always created by the whales for creating fear among the ‘weaker hands’. There is no need to panic if a large volume of that particular crypto coin is being sold. The process the trader needs to follow in order to benefit from the sell wall has been provided given below.
- First, quite obviously, the trader has to find a sell wall.
- The trader has to study the wall properly such as to avoid falling into the trap of a fake wall.
- The trader can cross check the existence of a sell wall by looking at the depth charts (provided on the exchange websites).
- The trader then has to decide how much amount s/he is willing to invest. It should always be kept in mind that the amount being invested should not cause too much problems if the trade ends in a loss. After all, the market of cryptocurrency is highly volatile and unpredictable.
- The trader has to literally Hold On to Dear Life (HODL) until the whales have completed accumulating the crypto coins.
The trader who waits will make more profits as the price usually rises rapidly after the selling pressure has been completely abolished. However, it is always advised to do a thorough research before making an investment.
Things to Remember for Novice Traders: Novice Traders have Problems understanding how to use sell walls to their advantage. Below is a list of things to remember for every novice trader while using Sell walls.
- The main Purpose of the existence of Sell walls is for the Whales. They can accumulate significant volume of a certain coin at a certain price range before it changes.
- When a huge sell-wall is seen, it generally means that some other traders are accumulating tokens for a bigger gain.
- It is always advised for trader’s not to be influenced by fear. As a simple rule of thumb, “if you see everybody else selling, you stay in the gain, and vice-versa”
- The Power of Information is key and trading decisions should be based on facts, real-time data as well as technical knowledge rather than being influenced by emotions.
Research: Always the First Step to do before trading
The order book is vital in cryptocurrency trading as the trader can easily study the past and current prices of the crypto assets and determine the future price. As said earlier the buy or sell walls observed from the order book should be verified with the depth charts. Tools used for technical analysis should be combined with this in-depth researched and should be implemented when placing a Buy or Sell order. The trader must also research about the crypto coin they are investing in and the present situation of the coin. They should also do a fundamental analysis (reading news related to the cryptocurrency market). Choosing the crypto coin also matters as the whales usually create a wall relating to a cryptocurrency that has great future prospects.
Speculation still remains an integral part of the Cryptocurrency markets. The current prices for individual coins and tokens are largely based on speculation. It is also not entirely surprising there are things such as buy walls and sell walls, both of which influence the price quite a bit. The Popularity of using buy and sell wall strategy across the world’s exchanges are understandable as seen as the high volume of buy and sell orders for every particular coin. The major crypto-markets like Bitcoin, Litecoin, Ethereum etc have all seen the use of buy and sell walls in the recent past. It can be understood that the sell wall strategy is nothing more than an artificial oppression mechanism formulated by whales to keep the price well below the maximum threshold in order to influence the market. It is to be noted however, that buy and sell walls are not exclusive to any one trader specifically. Exchanges do not generally create buy and sell wall strategy on their own accord unless specified in an existing agreement, as in the case of ICOs.
Because of the varied nature of buy and sell wall strategy, there is difficulty in pointing out one specific strategy for success. Sell walls are often an indication of serious liquidity levels and buy and sell orders only appear for a brief period of time. Please let us know what do you think about buy and sell wall strategy, in the comment section.