Hello wonderful people, how are you today? I hope you're having a fantastic week. I'm ecstatic to be a part of this unforgettable lecture. In this article, I'll share my experience with The Bid-Ask Spread instructed by @awesononso

1)Explain the Bid-Ask Spread.

The quantity whereby the asking value for a marketplace commodity exceeded the bid price is known as the bid-ask spread. The big difference here between the maximum price a purchaser is prepared to spend for an item and the lowest costs a vendor is prepared to take is known as the bid-ask spread.

The transaction fee is the spread. The marketplace makers purchases at the bid price and sells at the asking price, whereas value takers purchase at the asking price and sell at the bid price.

The bid-ask spread is mainly determined by liquidity—the narrower the gap, more the liquid the commodity.
Whenever a purchaser places an order, they are obligated to buy or sell their assets at the negotiated cost.

2) Why is the Bid-Ask Spread Important in a Market?

Bid-Ask Brokers pay close attention to and study the spread in the marketplace. It will display and assess the stock's liquidity over a specified period of timeframe. The supply-demand equilibrium in the marketplace is an essential and significant element in regard to trade. The supply of an item or coin refers to the quantity of that commodity or currency that is ready for purchase in the exchange at any one moment.

• The capacity to show the liquidity of a capital commodity is among the most significant and crucial functions of the Bid-Ask Spread. As previously said, in a financial sector with several purchasers and sellers, the spread becomes extremely tiny, but in a marketplace with fewer vendors and purchasers, the spread becomes much larger.

• Then there's the Bid-Ask Spread, which is an excellent indicator of the trading risk associated with any financial asset on the marketplace. Investors can execute buy and sell bids in the marketplace thanks to the market's volatility.

3) If Crypto X has a bid price of $5 and an ask price of $5.20,

a.) Calculate the Bid-Ask spread
b.) Calculate the Bid-Ask spread in percentage.

Solution(a)

the Bid price is $5.0, Ask price is $5.20
Bid-Ask Spread = ?
we know that.
Bid-Ask Spread = Ask Price - Bid Price
so,
Bid-Ask Spread = $5.20 - $5.0
Bid-Ask Spread = $0.20

solution(b)

to calculate Bid-Ask percentage we have formula ,
Bid-Ask percentage = (Spread/Ask Price) x 100
Bid-Ask percentage = ($0.20/$5.20) x 100
Bid-Ask percentage = 0.0384615 x 100
Bid-Ask percentage = 3.8461%
Bid-Ask percentage = 3.84%

4) If Crypto Y has a bid price of $8.40 and an ask price of $8.80,

a.) Calculate the Bid-Ask spread.
b.) Calculate the Bid-Ask spread in percentage.

Solution(a)

The bid price is $8.40
Ask price is $8.80
we know that
Bid-Ask Spread = Ask Price - Bid Price
so,
Bid-Ask Spread = $8.80 - $8.40
the Bid-Ask Spread will be $0.40

Solution(b)

for finding Bid-Ask spread in percentage
we know that,
Spread percentage = (Spread/Ask Price) x 100
so,
Spread percentage = ($0.40/$8.80) x 100
Spread percentage = 0.04545 x 100
Spread percentage = 4.5454%
the Spread percentage will be 4.55%.

5) In one statement, which of the assets above has the higher liquidity and why?

The liquidity of crypto X is greater than that of crypto Y. The explanation for this is that crypto X has a lower spread than crypto Y. The liquidity of an item or product is determined by the spread. The lower the spread, the more liquid the market is, and the higher the spread, the less liquid the market is. As can be seen from the statistics provided we came to know that, crypto X has a $0.20 spread while crypto Y has a $0.40 spread.

6) Explain Slippage.

Slippage:

The variation among a market's estimated value and the cost at which it is completed is referred to as slippage. Slippage can happen anytime, but it's more common when marketplace trades are utilized through moments of increased volatility. It can also happen when a huge order is placed and not enough volume is available at the selected price to keep the existing bid/ask spread.

or in another term, we can say that,

The gap between the projected price at which a transaction is executed and the actual cost where the deal happens is referred to as slippage. In basic terms, it happens whenever an order you put on the marketplace is completed at a varying price than the one you intended.

7) Explain Positive Slippage and Negative slippage with price illustrations for each.

Positive slippage:

A positive slippage occurs when each of the orders is completed at a cost that differs from the expected value but is still at the order's advantage. A positive slippage on a purchase order indicates that the transaction is completed at a cheaper value than the planned value. In the case of a sell other, the order is activated at a price higher than the value at which the buyer placed an order.

For example,

when a person or trader placed a buy order of a coin that is currently accumulating at $2.3 and he placed a buy order at $2.1 but the order activated at $2, Then the positive slippage can be calculated as, $2.1 - $2= $0.1

and if a sell order is placed at a market price of $3 but it fulfilled at $3.2, then the positive slippage for this order will be
$3.2- $3 = $0.2

Negative Slippage:

The total inverse of positive slippage is negative slippage. The order is negatively completed at a cost that differs from the value at which a buyer intends to implement the trade. Negative slippage on a purchase order indicates that the order was completed at a price higher than the planned price. Negative slippage for a sell order indicates that another is completed at a cheaper rate than the expected price.

for example,

if a trader picks a coin of market value 5$ and he placed the order at $4.5 but the order got filled at a price of $4.7, the negative spillage will be,
$4.7- $4.5= $0.3

similarly, if he wants to sell that 5.5 but the order got filled at 5.3. Then the negative slippage will be.
$5.5-$5.3= 0.2$

Conclusion.

I was able to comprehend several essential terms in Prof @awesononso's presentation, such as Bid Price, Ask Price, Bid-Ask Spread, Spillage, Liquidity, and etc. These phrases may appear minor, thus they are critical aspects of financial trading that should not be neglected.
The bid-ask spread is a crucial factor to consider when dealing with any commodity or coin. Intelligent dealers will undoubtedly pay attention to and study this in order to determine the market position, which includes liquidity and supply and demand balance. This can offer knowledge that makes the payment process easier and faster to complete.

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