A wall for buying and selling – what is it in cryptocurrencies?
What are Buy Walls and Sell Walls in Cryptocurrency Trading?
In cryptocurrency trading, buy walls and sell walls are indicative of the state of a coin. Traders can easily identify them by looking at the order book, which reflects the market depth and the number of current orders.
Buy Wall or Green Wall
A green wall occurs when there are more buy orders than sell orders. This indicates that the majority of participants want to acquire the cryptocurrency. The higher the wall, the more significant this indication becomes. It often leads to a substantial price increase, making it a useful indicator for traders.
Sell Wall or Red Wall
A sell wall occurs when there are more sell orders than buy orders for a cryptocurrency. Numerous traders are looking to sell the asset, indicating that its price is likely to decrease further. This can be a good signal to sell the coin and buy it back at a lower price. Sell walls can also be artificially created, similar to buy walls.
Real and Artificial Walls
Cryptocurrencies are a speculative market, so it is important to differentiate between the actions of genuine users and speculative whales. A large trader or a group of whales may create a wall of orders to prevent the price of an asset from rising or falling. Alternatively, they may intentionally provoke an increase or decrease in the price of a specific token.
It is possible to determine the origin of a wall:
- Pay attention to the order book as the wall may appear and disappear quickly when whales influence the market and make a profit.
- If the wall remains in the order book for a long time, it indicates that a genuine trader is patiently waiting for their order to be executed.
The ability to recognize an artificial wall is an important skill because such a wall can trigger fear of missing out (FOMO) and lead ordinary traders to financial losses.