What Is a Sell Wall?
A sell wall refers to a significant concentration of sell orders placed at a particular price level, which can have a notable impact on the market by potentially causing the price to drop significantly.
These sell orders are often placed by individuals with substantial holdings or whales who aim to manipulate asset prices to their advantage.
Other traders may also contribute to the sell wall by adding their sell orders.
Whales and Sell Walls
Whales, with their extensive holdings, can influence prices by strategically placing sell walls.
The purpose of a sell wall is to create resistance, indicating to other traders that the price cannot easily surpass a certain level without facing substantial selling pressure.
Typically, sell walls are not placed to execute trades at those levels. Instead, they are used as a tactic to bluff other traders into placing their sell orders below the wall, resulting in a downward price movement.
Sizing Up Sell Walls
A significant sell wall suggests that a substantial increase in supply is expected once the price reaches a certain level.
This can dampen demand and subsequently drive down the price.
Traders may choose to avoid buying at that price or sell off their assets at a lower price, creating opportunities for shorting by the whales.
Whales can continuously place and remove sell walls on the order book as a means of price manipulation.
Many exchanges provide depth charts illustrating buy and sell walls, allowing traders to observe and analyze market conditions.