April 30, 2021

How to use market depth in forex?

how to read market depth chart

Because of the delay the Heikin-Ashi chart has less number of false signals and prevent us from making false decisions. On the other hand, Heikin-Ashi candles are easier to read because unlike the candlesticks they don’t have too many different patterns. By registering for an account with us, you can set-up live trading charts and gain access to all of our platform features that are exclusive to account holders. This includes daily Reuters and Morningstar updates, as well as chart forums and module linking opportunities.

What is market depth on chart?

A market depth chart, also known as a level 2 market data chart, represents the supply and demand for a particular asset at different price levels. The chart typically displays the purchase and sell orders for the purchase, along with the prices at which these orders are placed.

In a trading range prices are essentially flat on average over a period of time. When price reaches the bottom of a range then buyers will find value there and they will buy. When price is considered extended in uptrends then it will pull back because buyers have stopped buying.

MACD Bearish 0 Line Rejection

Among these are also more niche trading charts that are preferred by more experienced traders, such as Point & Figure, spread, Heikin-Ashi​, Line Break and scatter graphs. A scalping technique seeks to trade in the direction of the trend and enter during a pullback when the price begins to move back in the trending direction. To do so, traders seek engulfing patterns, such as when a candle in the trending direction envelops a candle in the retreat direction, to signify an entry. Scalping is a trading method in which gains and losses are taken swiftly, as deals are often completed in a few minutes or less.

In the chart above with the arithmetic price scale, the decline appears to be fairly steady and consistent. As mentioned earlier, it is worth experimenting with both types of scale, as one may reveal factors that the other masks. This weekly chart may change what you thought about the security from just looking at the recent daily chart. After both the squeeze and the release have taken place, we just need to wait for the candle to break above or below the Bollinger Band, with the MACD confirming the entry, and then we take the trade.


The next important element of a candlestick is the wick, which is also referred to as a ‘shadow’. These points are vital as they show the extremes in the price for a specific charting period. The wicks are quickly identifiable as they are visually thinner than the body of the candlestick. The direction of the price is indicated by the colour of the candlestick. If the price of the candle is closing above the opening price of the candle, then the price is moving upwards and the candle would be green (the colour of the candle depends on the chart settings).

how to read market depth chart

The price of a financial asset is critical to trading as the price change determines potential profit or loss. Traders who opt to focus simply on price charts must follow a price action strategy that includes analysing price movement to determine when to enter or exit a position. The basic premise on which technical analysis is based is that the movement of the price in the future can be predicted based on its future performance.

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In normal security or commodity trading, the order book — the set of all the buy and sell orders — has a fair bit of depth. So the market is reasonably robust and the order book isn’t thin and it’s hard to manipulate it very much. The green line (left) is cumulative “buy” orders below the current price — if you have coins to sell, they will buy them from you. The red line (right) is cumulative “sell” orders above that price — if you want to buy coins, they will sell them to you. The red (left) is “buy” orders for USDT when the USD price goes down that far, and the black (right) is “sell” orders for when it goes up that far. The bottom chart is the orders themselves, the top chart is cumulative.

how to read market depth chart