Sometimes, crypto traders find a large volume of sell orders at a particular price, leading to a stagnant price at that level. What is a sell wall? In cryptocurrency trading, a sell wall refers to a large sell order or a series of sell orders placed at a specific price level on an exchange. This sell order or series of orders creates a barrier, or a "wall," preventing the cryptocurrency's price from rising above that level. As a result, the sell wall can significantly impact the supply and demand of the cryptocurrency and affect its trading volume and price.
Sell walls are used for:
Profit taking: A large sell wall can be created by traders who have already bought a significant amount of a particular cryptocurrency at a lower price and are looking to cash out and take their profits.
Market manipulation: In some cases, a sell wall can be created artificially by a group of traders or investors to manipulate the market. This tactic is often used in pump-and-dump schemes, where investors buy a large amount of a cryptocurrency at a low price, create a sell wall, and then sell their holdings at a profit once the price drops.
Stop-loss orders: A sell wall can also be created unintentionally by traders who set stop-loss orders at a specific price level. However, if many traders set stop-loss orders at the same price level, it can create a sell wall and prevent the price from rising above that level.
Sell walls can have a significant impact on the price and trading volume of a cryptocurrency. Traders who want to buy the cryptocurrency at a lower price may wait for the sell wall to be broken down, while traders who want to sell the cryptocurrency may try to sell their holdings before the wall is broken down.
What is a wall in stocks? Sell walls also occur in stock trading and can significantly impact price.