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adam

@abetrade

Feb 28

Compared to traditional futures or forex, one of the biggest advantages of trading crypto is the transparency of data.

Data that often costs hundreds of dollars per month in traditional finance is available in crypto for free or at a fraction of the cost.

This thread will cover one of my favorite tools—the order book data.

/cont

what is order book data

Simply put, order book data shows the orders that are currently resting in the order books.

One of the most popular uses of this data that I’ve seen over the years is heatmaps.

These charts visualize limit orders directly on the price chart, often using gradient colors to represent the concentration of resting orders at different price levels.

In my opinion, while heatmaps can be useful at times, they tend to draw too much attention to individual orders, many of which may just be spoofs—orders placed with no real intention of being filled.

order book as supply and demand indicator

In my opinion, a much better use of order book data is analyzing who has the heavier hand by looking at delta imbalance—the difference between resting buy limit orders and resting sell limit orders.

Luckily, you don’t have to calculate this delta manually by analyzing the order book, as many platforms provide it as an indicator.

Here’s a chart example from In my opinion, a much better use of order book data is analyzing who has the heavier hand by looking at delta imbalance—the difference between resting buy limit orders and resting sell limit orders..

As you can see, when the delta between limit buyers and sellers becomes significant, we often see price reversals due to the large presence of supply or demand in the market.

Read 6 tweets

adam

@abetrade

Feb 18

Open interest can provide valuable insights into market positioning, but I often see it misinterpreted online.

This thread will break down everything you need to know about OI in a quick and straightforward way.

Open Interest Definition

Open interest does not mean that people are openly interested in the market. Instead, it measures the number of outstanding contracts in a given market.

In other words, it tracks the positions that are still open and have not yet been closed.

In the simplest terms:

Open interest increasing = traders are opening new positions.
Open interest decreasing = traders are closing positions.

The biggest mistake I often see online is the claim that markets move because "there are more buyers than sellers."

This is not true. For every buyer, there must be a seller, and vice versa, meaning all positions are always matched 1:1.

So, why does open interest change if every trade has both a buyer and a seller?

The reason is that not everyone in the market is trading directionally. Delta-neutral participants, such as market makers, do not speculate on price movements—they simply provide liquidity.

Because of this, you can think of open interest as a measure of directional positions in the market.

Open Interest as an Indicator

Open interest is plotted as a running indicator in a separate panel below the price chart.

It is available on all popular charting platforms such as TradingView, Velo, TradingLite, and others.

We observe large changes in open interest, which can signal potential breakouts or the end of a move.

As you can see on the chart below, a significant rise in open interest while the price barely moves upward indicates that many directional longs have entered the market. If that’s the case, the price should be trading much higher.

This happens because someone on the opposite side is filling passive sell orders into rising prices. This could occur either on the same exchange or in the spot market.

Read 7 tweets

adam

@abetrade

Feb 14

As with most aspects of trading, order flow has been heavily over-marketed over the years by many as a so-called "hidden grail" that will unlock secret insights and make you profitable overnight.

This often comes with absurd price tags and overly complicated explanations.

This thread will teach you the most important concepts of order flow trading in just a few minutes.

So, what is order flow trading?

Simply put, it is the study of the relationship between limit and market orders.

Most of the focus is on market orders, as they are the ones actually executed in the live market, while limit orders often act more like advertisements in the order book.

While, in its simplest form, you can see limit and market orders on the depth of market (DOM), making trading decisions based solely on that is extremely difficult—if not nearly impossible.

This is especially true in thin markets like crypto, but in reality, all markets have become much thinner over the years, increasingly dominated by market makers (MMs), high-frequency traders (HFTs), and overall market noise.

Before we continue, keep in mind that all of these tools and concepts are only viable for short-term trading. Anything plotted on a higher timeframe is just misleading.

Read 12 tweets

adam

@abetrade

Feb 10

Over the last few years, there has been a significant shift in Bitcoin market participation.

The BitMEX era of wild volatility spikes and relentless stop runs is long gone, replaced by a market shaped by more sophisticated participants.

This thread will cover tools that can help you make more informed decisions across emerging derivatives—some of which you might not even be aware of.

Commitment of Traders

The COT (Commitments of Traders) report is a weekly publication by the CFTC that breaks down the positioning of different market participants in futures markets, this report can give you valuable insights into the positioning.

In Bitcoin futures that are traded on CME, the main participants are:

Commercials (Hedgers): Institutions like miners and large firms using futures to hedge price risk.

Non-Commercials (Large Speculators): Hedge funds and asset managers trading for profit, often trend-followers.

Non-Reportables (Small Speculators): Retail traders and smaller players who are not required to report their positions to CFTC.

Although the COT report for Bitcoin futures has been available since 2017, when BTC futures launched on the CME, it only became significantly relevant after October 2023, when open interest nearly tripled.

The best way to use the COT report is not by looking at the running total of positions but rather by using normalized indicators that provide a much clearer view of positioning.

While behaviors vary across markets, the general approach is to trade in the same direction as Commercials while fading Speculators and Non-Commercials.

Small speculators and non-commercials typically bet on trends but are often forced to exit when they are wrong, which drives prices in the opposite direction due to position covering.

Read 13 tweets

adam

@abetrade

Feb 6

Orderblocks are probably one of the most popular and over-marketed concepts regarding price action trading.

Supply and demand zones, orderblocks, bases, clusters and millions of other names are floating around the internet, usually hidden behind the paywalls.

This thread will explain everything you need to know about them so you can start using them in your trading without paying for anything.

First, there is absolutely zero magic voodoo manipulation reasoning why prices react from these levels.

The market is going up from the demand zone and down from the supply zone because large traders that move prices accumulate their positions slowly.

If you want to accumulate a significant position, you can't just buy or sell wherever you want; you need to do it in an area with enough liquidity to avoid slippage.

These liquid areas are often seen as sideways price action where there is enough two-way auction (plenty of buying and selling).

The optimal condition for large traders to buy is when a significant amount of traders are selling simultaneously.

That way, they will ensure the best possible entry since there are plenty of counterparties for their orders in the market.

To drive this point forward, we can use a cumulative volume delta, which shows executed market orders.

As you can see, there was a lot of market selling while the market went sideways and also on the retracement.

Why did the market not go down? Large traders were buying into sell orders until they were completely absorbed.

Read 7 tweets

adam

@abetrade

Feb 3

One of the most discussed and used concepts in discretionary trading is liquidity and evil market makers' consistent hunt for stop-losses.

The concept of liquidity is often overblown to make it much more interesting and usually just straight-up false.

This thread will explain everything you need to know.

Although liquidity is often associated with stop-losses of other traders, this is false.

Liquidity stands for the resting (limit) orders ready to be filled.

We can see them in the depth of the market (DOM) or through tools such as heat maps.

Stop-losses, i.e., stop orders, are not visible inside the order book.

Tools such as liquidation maps, which have become very popular in recent years, only work on assumptions about where stop-losses and liquidations will be placed rather than having the actual data.

Markets are always seeking liquidity as it fuels price movements.

We can argue if moves under apparent levels of support or above resistance, which often has plenty of resting liquidity, fall into some manipulation, or it is just natural price behaviour due to the herding nature of market participants.

In crypto, we can often see this dynamic as spot buyers providing liquidity at the lows or highs, causing moves to mean-revert.

Read 7 tweets

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