Cryptowatch has released a new way to enter and manage orders. Ladders, long used by traders in institutional spaces to quickly and accurately enter and manage orders, are now available on Cryptowatch Desktop to all retail traders.
Check out our new ladder trading tool on Cryptowatch now. If you have a Kraken account, it’s available for free!
With ladder trading, users can place or modify multiple orders with just a few clicks, giving them more control over their trades and allowing them to capitalize on market movements with speed top of mind. This feature is especially useful for market makers looking to scale in and out of positions, or arbitrage traders taking advantage of increased volatility between markets.
In this blog post, we’ll tell you how ladder trading began, explain how trading on price ladders work and how you can use them on Cryptowatch Desktop. We’ll also share some tips and strategies for making the most of this powerful new feature.
Brief History of Ladder Trading
Before the turn of the century, most financial exchanges still had trading floors. Clustered into pits, traders could make trades in split seconds through hand gestures or verbal confirmations. The system was optimized for speed of execution, and a competent trader on the floor could make trades in under a second.
With the advent of widespread computerization, exchanges developed matching engines and moved trades off the floor. The theoretical speed of trading increased substantially, but the Order Entry was the bottleneck in entering manual trades quickly. Screen traders, though their theoretical speed had vastly improved, still needed a novel front-end solution in order to be quicker than their counterparts on the floor.
Enter the ladder. Introduced by Trading Technologies as the ‘MD Trader’ around the turn of the century, it revolutionized how professional screen traders entered and managed their trades. The efficiency it delivered meant that it was quickly adopted by nearly the whole industry. Eventually, it made its way to retail platforms and is now widely used in traditional finance.
Continuing the tradition of bringing ladders to where they are most needed, Cryptowatch is premiering Ladder trading to retail users in crypto!
What is Ladder Trading?
Ladder trading has long been used by traders in institutional spaces to quickly and accurately enter and manage orders. A ladder module combines quick-input trade execution tools with a module to monitor live order book liquidity depth, and real-time updates on recently matched trades and bid-ask spreads.
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Advantages of using ladders vs trade tickets
Before diving into the advantages of using ladders and why we built them, let’s take a look at how traditional order entry methods work. Many crypto traders currently use a combination of a chart and trade ticket module, while looking at a depth chart, order book, tick chart, and/or a time and sales for additional context:
Modern charting solutions (such as those offered by Cryptowatch) are responsive, powerful and almost infinitely customizable. However, they are still limited in two ways:
- They only show historical information – charts can show you what has occurred in a market, but are not built to show what is currently happening or let a trader easily intuit what will occur.
- They require screen space in order to be effective – it is difficult to be able to view multiple charts on the same screen without losing some fidelity and resolution.
Trade tickets can be limiting to a trader needing quick execution as well. They are single purpose modules that require filling out a form to send an order. The last thing a trader that needs to execute quickly wants to do is fill out a form. Filling out forms is for the back-office, not the execution desk!
Additional modules that convey information (depth charts, order books, time and sales, etc.) impose additional demands on screen space and user attention. Getting a full view of the breadth and depth of a market requires a significant portion of a user’s screen and they are still limited in how quickly they can execute trades.
The example above shows two markets, each with a chart, order book, time and sales, spread chart and an order ticket. In addition, there are aggregated modules in the center to manage orders and view fills and balances. Despite having a large monitor, trying to fit more than two markets and retain full functionality is difficult.
Ladders solve these pain points in an intuitive and efficient manner.
A ladder takes aspects of many different modules that traders are already familiar with, and combines them into one lightweight interface that can be replicated to view multiple markets on one screen.
Each market can be encapsulated almost entirely by a ladder. A user can have execution and market observation on many markets at once on one screen, so there’s no need to have a chart/order book/trade form combination of modules for each market.
Above is an example of being able to look at and trade on 16 different markets simultaneously. Each module is independent of the rest, and contains all the information needed to trade — laid out in a way to enable a seasoned trader to absorb the information quickly and intuitively.
Introduction to Cryptowatch Ladders
Let’s look at a ladder module closely in order to understand how it functions:
There are several other things that we can tell at a glance by looking at this ladder!
The pink arrows point to the range of this market since the app was opened. It’s also shown numerically on the left, but when you’re trading, it’s extremely helpful to see how close you might be to the high/low.
We can see that the market is as tight as possible. At 0.9999/1.0000, there isn’t any room to improve the price on either side.
We can tell that the market is deep and roughly equally weighted. There is a good amount of liquidity bid and offered outside the top of book, and that leads us to realize that both the orders we are currently working have very little chance of getting filled unless something changes.
To summarize — at a glance, this one module allows users to see the following information about a particular market:
- The Market width and depth in real-time, including bid/ask/mid/last prices
- Traded levels and volumes
- Price history and important market levels
- Changes in market structure in real-time
Trading on Cryptowatch Ladders
Let’s observe how to place a trade using a ladder.
One thing that ladders do really well is provide a trader with the ability to execute on multiple markets in a very short amount of time. When trying to take advantage of short-lived price discrepancies on different markets, ladders can be essential.
The following is an example of a potential arbitrage opportunity between KuCoin and Binance on the BTC markets:
As we can see, one can sell at $16,804 USDT on KuCoin and pay $16,803 USD on Binance. These opportunities are extremely short lived. If a trader were to use a trade order ticket, they’d have to fill out the form, submit it and then follow the same process all over again for the next market. By the time they executed the first leg, the opportunity would probably already be gone.
Let’s observe how we can trade this using ladders instead!
With a total of four clicks (two if order confirmations were turned off), we executed two trades on two markets on separate exchanges.
Ladders allow traders to:
- ‘Point and click’ trade for quickest and most efficient execution
- Trade across multiple markets on the fly
- Never have to fill out forms (which can be expensive!)
- Quickly ascertain liquidity impact of orders and make better informed decisions
- Modify orders on the fly
Check out a handy infographic below breaking down each column of the Cryptowatch Ladder Trading module.
The Cryptowatch team is extremely excited to be the first to offer retail traders access to ladders in crypto markets! This has been a culmination of years of work by team members with decades of combined experience trading professionally in traditional markets. By launching ladder trading, Cryptowatch continues to be on the cutting edge of crypto trading platforms.
We look forward to hearing your feedback, your questions or any comments you might have. Tag us @cryptowat_ch on twitter and let us know!
The Cryptowatch Team
