Sell Wall

Understanding the Concept of a Sell Wall

A sell wall is a significant sell order or a series of sell orders placed at a specific price level. Its purpose is to potentially cause a significant drop in the price of an asset. Typically, individuals with high net worth, commonly known as “whales,” are the ones who place these sell walls to manipulate asset prices in their favor. However, other traders can also contribute to these sell orders.

Whales can manipulate prices due to their large holdings or units of a particular asset. Sell walls effectively suppress asset prices and confine them within a specific range. They work by signaling to other traders that the price cannot surpass a certain level without encountering significant resistance.

When large holders or whales intentionally place sell walls, their intention is usually not to buy from other traders at that level. Instead, they aim to deceive others into placing their sell orders below the sell wall, resulting in a downward movement of the price.

A massive sell wall indicates that the available supply of the asset will increase once the price reaches a certain point. This increase in supply subsequently leads to a decrease in both demand and price. Traders, therefore, choose to refrain from buying at that price or decide to sell their assets at a lower price. This situation creates opportunities for whales to engage in shorting.

Whales have the ability to continuously place and remove sell walls on the order book to manipulate prices. Most exchanges provide interactive depth charts that display buy and sell walls.

On the other hand, a buy wall is the opposite of a sell wall. It provides support and can cause the price of an asset to move upwards.