Good day all, today I will be taking my assignment for professor @awesononso in the Steemit crypto academy beginner course program.

1) Properly explain the Bid-Ask Spread.

Before Explaining the Bid-ask Spread I am telling the basics of these two Individually. Bid prices ask the very best price that the traders are willing to buy a security. The Ask price refers to the lowest price that the owners of that security are willing to sell it for.

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Bid-Ask Spread is the difference between the selling price and the buy price of a security.
So, Mathematically
Bid-Ask Spread = Ask price - Bid price
Simply It is also called The Spread.

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2) Why is the Bid-Ask Spread important in a market?

It can even be used to arrange the purchase of stocks. The bid-ask spread is extremely important within the marketplace. It's the difference between the customer 's and seller's prices, The bid-ask spread indicates the worth level at which the buyers want to shop for and therefore the sellers want to sell their asset.—or what the buyer is willing to buy something versus what the vendor is willing to urge so as to sell it.
It's a very important barometer of liquidity.Bid-Ask Spread is important because it is employed repeatedly to work out the liquidity of any stock within the markets.

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

a.) Calculate the Bid-Ask spread.

Bid-Ask Spread = Ask price - Bid price
Bid-Ask Spread = $5.20 - $5
Bid-Ask Spread = $0.2

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

%Spread = (Spread/Ask Price) x 100
%Spread = ($0.2/$5.20) x 100
%Spread = 3.846%

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

a.) Calculate the Bid-Ask spread.

Bid-Ask Spread = Ask price - Bid price
Bid-Ask Spread = $8.8 - $8.4
Bid-Ask Spread = $0.4

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

%Spread = (Spread/Ask Price) x 100
%Spread = ($0.4/$8,80) x 100
%Spread = 4.54%

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

As we calculate Both spreads Crypto Y is 0.40$ and Crypto X is 0.20$ so, the spread of crypto Y is bigger and Crypto X is Smaller so, the smaller spread indicates the high liquidity. so, Crypto X has higher Liquidity.

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6) Explain Slippage.

Slippage means that the bid-ask spread is so volatile that the price changes between the time your market order is placed and the time it is executed This change can be positive or negative it simply means that there is a difference between the intended execution price and the actual execution price. Most commonly Slippage occurs at times of low liquidity and high liquidity, this could be because of a major news event, big political or market announcement, or simply whether the trade.

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

Positive Slippage

Positive slippage is once you receive a price that's better than the one you were attempting to shop for at. In Positive Slipphage the ask has decreased during an extended trade or the bid has increased during a brief trade.

Example as Opening a Trade:

A trader wants to buy an ADA coin at a price of 1.5$. As the position is opened, the executed price is 1.4$, It Means that the trader has opened a position at 0.1$ less than intended for the same trade.

Example as Closing a Trade:

A broker intends to exchange coin, shutting their situation at a cost of 0.15$. The executed value that the position is shut at, however, is 0.40$, which means the dealer has profited from the slippage to the tune of 0.25$.

Negative Slippage

This is the place where the trader loses value, as the executed cost is more expected than the normal cost.
Example as Opening a Trade:

A trader plans to exchange Dogecoin at a cost of 1$ and snaps to open a long situation at this cost. At the point when the exchange is executed, however, the value 'slips' and the position is opened for DogeCoin at the 1.1$, the new value it increases to i.e 1.1-1=0.1$

Example as Closing a Trade:

A trader is hoping to sell Dogecoin at a cost of 1$ and snaps to close his vacant position. The cost at the time of execution when the exchange is closed tumbles to 0.99$ however, so for this situation, the trader has missed out by one of significant worth i.e 0.1$

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Conclusion:

Thank you professor @awesononso for this informative and insightful lesson.

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Respected mention

@awesononso

Regards,

@fabiha

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