Chart Reading and Volume Analysis for Beginners

If you're new to trading, you're probably focused on the price chart. But professionals see much more. They're watching the order book, volumes, and spreads to understand what's really happening in the market.

This clear guide will help you learn how to read an order book and analyze volume. We'll break down what depth and spread are, step by step, and show you how to place limit orders correctly so you don't lose money unnecessarily.

What Is an Order Book and Why Is It Important?

An order book is simply a table of current buy (bids) and sell (asks) orders at different prices.

• On the left (green): Those who want to buy.
• On the right (red): Those who want to sell.

Why look at it? The order book shows where liquidity is concentrated. If you see a huge buy order at a certain level, that's strong support—a "floor" that the price will struggle to break through.

Order Book Depth: Explained in Simple Terms

Order book depth refers to the cumulative volume of all buy and sell orders.

• A deep order book: Lots of orders at various prices. This means the market is "live," and you can easily buy or sell a large amount without significantly impacting the price.
• A "thin" or "empty" order book: Few orders. Any large trade can cause a sharp spike or crash in price.

How to Read the Order Book and Chart: A Beginner's Plan

1. Look at the trend. Start by analyzing the chart on a 1-hour or 4-hour timeframe. Where is the price headed overall?
2. Open the order book. Find the best bid (highest buy price) and ask (lowest sell price).
3. Assess the spread. The spread is the difference between the best bid and ask.
   • A narrow spread = high liquidity, safe to trade.
   • A wide spread = low liquidity, high risk of slippage.
4. Check the depth. Look at where the largest orders are concentrated. These are your potential support and resistance levels.
5. Compare with volume. Volume analysis for beginners is simple: if the price is rising and volumes are also rising, the move is real. If the price is rising but volumes are falling, it's a trap.

How to Place Limit Orders: A Step-by-Step Guide

A limit order is your main tool for saving money. It allows you to specify the exact price at which you are willing to make a trade.

How to place limit orders:

1. Open the order window on your exchange and select the "Limit" order type.
2. In the "Price" field, enter your desired level (e.g., slightly above a large buy wall).
3. Specify the volume and confirm the order.

Tip: Don't place your order right on top of a large "wall." Big players can "spoof" (place fake orders) to manipulate the price.

Why Does Volume Analysis Matter?

Volume analysis helps you understand if a price move has real strength behind it.

• High volume on a breakout confirms that the breakout is genuine.
• Low volume on a rally suggests that the move is about to run out of steam.
• Volume Profile shows at which price levels the most trades have occurred in the past. These levels often act as a magnet for the price.

The Role of Market Making and How Coinrate Helps

Professionals (market makers) don't just read the order book—they create it. They place orders on both sides, earning on the spread. Understanding their logic gives you a huge advantage.

Our mission at Coinrate is to make market making and liquidity management understandable for the retail trader. We provide tools and education that help you see the market through the eyes of a professional.

Conclusion

Chart reading for beginners is more than just candles and lines. By learning how to read an order book, understand depth, and analyze volume, you'll elevate your trading to a new level. You'll be able to place orders more precisely, avoid traps, and control your risks.

Start small: just watch the order book and volumes on liquid pairs. Over time, you'll start to see patterns that are hidden from most.

FAQ

Q: Where should a beginner start with reading an order book?
A: Start by observing the spread and looking for the largest buy and sell orders (the "walls").

Q: How can I spot fake orders?
A: Fake orders are often placed and canceled quickly without being filled. Real orders tend to stay on the book longer.

Q: Do I need a bot for market making?
A: Not to start. But once you've mastered the basics, automation with platforms like Coinrate will save you time and remove emotion.

Q: Where can I practice?
A: On demo accounts or with minimal amounts in a live market. The key is to constantly compare what you see on the chart with what's happening in the order book.

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This material is for informational purposes only. Please evaluate the risks independently before investing.

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