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Buy and sell walls in cryptocurrency are excellent indicators of a coin's condition. An exchange user can easily find them in the order book by opening the order book, which reflects market depth and the number of current orders.
Buy Wall or Green Wall
A green wall occurs when buy orders exceed sell orders. This shows traders that most people want to purchase the cryptocurrency. The higher the wall, the more significant this indication becomes. Over time, this leads to a notable price increase, making this indicator very useful for traders.
Sell Wall or Red Wall
A similar wall arises when sell orders outnumber buy orders for a crypto asset. Numerous traders want to sell the asset, so its price will soon drop even lower. This is a good signal to sell the coin and then buy it back at a lower price. A sell wall can also be artificially created, just like a buy wall.
Real and Artificial Walls
Cryptocurrencies — being a speculative market — require distinguishing between the actions of genuine users and whale speculators. A large trader or a group of whales can create a wall of orders to prevent an asset's price from rising or falling. In other cases, they provoke a surge or decline in the value of a specific token.
It is quite possible to determine the origin of a wall:
- Pay closer attention to the order book; a wall may appear quickly and disappear just as abruptly — whales have influenced the market, made a profit, and then removed the wall;
- If the wall remains in the order book for an extended period — this 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, as such walls create fear of missing out (FOMO) and lead average traders to financial losses.
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