The inside line on the Order Book
The Order Book displays current orders from other traders on the platform, which you can use to get an idea of how the market is moving. So before you decide whether to buy or sell any asset, check out which way it’s trending. For example, if the general consensus is that the value of an asset is going down, there will be more sellers than buyers in the Order Book. They may not be right, but it’s worth considering.
The Order Book is also helpful in deciding at what level to trade. Because it allows you to see orders from other traders, if you know the current level of your asset, you’re in a position to buy or sell immediately, at the price you want – increasing the chances of your trade closing ‘In the Money’.
How to trade with the Order Book
By understanding asset trend direction and most important price levels we can decide to open sell or buy contracts. On example above we can see that oil is in the downtrend, so we have 2 ways to build our strategy.
If according our prediction price of oil will continue go down, we can join sellers and open sell contracts on 4 most important ASK levels from the right side of the order book. Those levels are:
If according our prediction price of oil will continue go up, we can join sellers and open buy contracts on 4 most important BID levels from the right side of the order book. Those levels are:
It’s the Order Book that makes this strategy possible. Because you can see everyone’s activity on the platform, and trade directly with other clients, there’s no conflict of interest. And best of all, when your trade does close ‘In the Money’ you’ll receive a 100% return on your investment.
Help yourself with hedging
Because you’re trading directly with other clients on the platform, you can hedge your position and protect your trade – for maximum potential results.
Hedging creates another entry in the Order Book that offsets your position with a counter-trade. So let’s say you’re trading on the oil. You’ve just placed an order to buy 5 contracts, worth £20 each, at the level of 41.77. To hedge, you need to secure a counter-trade. So, in our example, that means placing a sell order for 5 contracts, worth £20 each, on oil at a higher level – let’s say 41.83. If your hedge order is matched, your original trade is protected.