Trades per Side
The Trades per Side indicator is an advanced order book metric. In quant finance this indicator is often referred to as Trade Sign or Taker Side.
Before diving into how the indicator works, first we have to clarify the notion of market makers and takers. Market makers supply liquidity to order books in the form of limit orders. Takers on the other hand remove liquidity from order books by executing market orders, in which they buy at the ask or sell at the bid.
Trades per Side shows the comparison in the volume (or count of trades) in which takers are buyers and sellers. In the graph itself, buyer-taker volume is shown as positive, while seller-taker volume is displayed as negative. This means that high numbers represent strong buying activity and potential urgency coming from buyers executing market orders. The opposite is also true.
Trades per Side for Bitcoin
The Trades per Side indicator is very useful to detect large movements in price. Since takers’ orders move the price by buying at the ask or selling at the bid, a high amount of volume in either direction tends to shift price significantly. For example, the image above shows a high amount of buyer-taker order volume at 15:13, which led to a spike in price by 0.5% within the following hour (a relatively high amount for Bitcoin in market circumstances of this moment).
As well, the Buyer - Seller Trades Difference below the graph points to the overall trend amongst market takers. In general, takers show more urgency since they are willing to pay extra fees to execute orders immediately. Therefore, an overall buyer dominance within traders points to a bullish trend for investor positioning.