I'm currently building a small bitcoin order book simulator that would mimic user limit orders. What gives order books its V shape appearance? That is, the further away we go from the market price, the more orders are stacked. For sellers, is it mostly profit driven, they want to sell higher than market price, and for buyers, they just want to buy cheaper than the market price? Is it mostly as simple as that? Plus maybe people wanting to trade the breakout?
1 Answer
what gives order books the V shape
I’m not sure what other shape could it be? (other than flat- no orders)? The order book represents all of the bids/asks of buyers/sellers in the market. Generally, it’s displayed in the ‘V-shape’ you mentioned, where the Y-axis of the chart displays the total cost to fill all orders between the market price, and the corresponding x-coordinate on the chart. So as you move further from the market price, there will be more orders to fill to reach that new price.
Is it mostly as simple as that?
Yeap, it’s just the orders that traders have submitted to the order book, easy as that.
