Taker Buy Sell Volume/Ratio

Understanding Taker Buy Sell Volume/Ratio involves discerning if the order taker is a buyer or seller based on ask or bid prices, distinguishing long volume from taker seller volume.

Definition: Taker Buy Sell Ratio/Volume

This concept is often confusing because every trade requires both a buyer and a seller of the given underlying asset. However, depending on whether the order taker is a buyer or seller (whether a transaction occurs at the ask price or the bid price), you can distinguish between long volume from taker seller volume.

Taker Buy Volume: Volume of buy orders filled by takers in perpetual swaps (USD)

Taker Sell Volume: Volume of sell orders filled by takers in perpetual swaps (USD)

Taker Buy Ratio: Taker Buy Volume / Total volume in perpetual swaps (USD)

Taker Sell Ratio: Taker Sell Volume / Total volume in perpetual swaps (USD)

Taker Buy Sell Ratio: Taker Buy Volume / Taker Sell Volume

Note we unify the unit of return value to USD for each exchange where its contract specification may vary and covers perpetual swaps only.

Interpretation

A Taker buy or sell enables the transaction of a financial asset instantly at the current best available price. As takers are increasing it could be interpreted as they are willing to pay more to buy or sell at the highest level in an instant. Utilizing this feature, we can identify whether buying or selling pressure is great.

By Value Itself

• Over values of 1: Taker buy Volumes > Taker Sell Volume-Dominant

It indicates to traders that more buyers are willing to buy coins at a higher price indicating that buying pressure is stronger than the selling pressure. It indicates a strong possibility of price rise and shows the bullish sentiment

• Under values of 1: Taker Sell Volumes > Taker Buy Volume-Dominant

It indicates that more sellers are willing to sell coins at a lower price indicating that sell pressure is stronger than the buying pressure.

Note

Even if the ratio is above 1 indicating that taker volume is dominant it does not necessarily mean that price is going up. It depends on the ratio and variance of volume that was traded on each bid/ask.

Additional Explanation

Taker

In the context of trading, a taker is a market participant who places an order that is matched with an existing order on the order book. Takers "take" liquidity from the order book by executing trades at the current market price.

Maker

Maker trade refers to an order that goes on the order book (e.g. a limit order). These orders add volume to the order book, helping to 'make the market'.

Buy Volume

This represents the total volume and value of assets or securities bought by market participants during a specific time period. It indicates the total quantity of assets acquired in the market.

Sell Volume

Conversely, sell volume represents the total volume of assets or securities sold by market participants during a specific time period. It indicates the total quantity of assets disposed of in the market.

Taker Buy Sell Ratio

The ratio is a comparative measure that expresses the relationship between two quantities. In this context, the ratio provides insight into how buying volume compares to selling volume among market takers.

Bid and Ask Price

A maker who wants to buy an asset is willing to place limit orders in the order book at a lower price, and a maker who wants to sell is willing to place orders at a higher price.

The bid price is the highest current price a buyer is willing to pay for an asset.

The ask price is the lowest current price a seller is willing to sell a security for. There is always a bid price and an ask price in an actively traded asset which continuously fluctuates.

When takers buy at the bid price set by makers, the amount of assets traded between the two contributes to the taker sell ratio and seller volume. This volume is selling volume because it has the potential to move the price down. When takers sell at the ask price, the amount of assets traded contributes to the taker buy volume–this volume pushes up the price.

If the current market has more taker buy volume than taker sell volume, it means there is a tendency to increase the price as more trades occur at the ask price. When the current market has more taker sell volume than taker buy volume, it means there is a tendency to push the price down since there are more traders selling at the bid price.

End Notes

The Taker Buy Sell Volume/Ratio stands as one of the pivotal indicators for traders. It offers valuable insights into market sentiment and potential price movements. Despite its initial complexity, this metric provides a concise yet powerful tool for navigating dynamic market conditions.

By evaluating the Taker Buy Sell Ratio and considering the interplay of volumes at bid and ask prices, traders can effectively gauge market dynamics. In doing so, this indicator becomes an indispensable asset for making informed decisions.