CryptoAcademy Season 4 Week 1 | Homework Post for Professor @awesononso |Bid-Ask Spread | by@inudi

Hello everyone, again after a while
It is a pleasure to attend the Academy.
I am pleased to present my first homework on the introductory course on "Bid-ask Spread" presented by Professor @awesononso in season 4, and have elaborated on the insights I have gained by reading the lesson on the above topic.

Thank you Professor @awesononso and in this article, I have answered the questions posed in the homework section below.

1. Properly explain the Bid-Ask Spread.

The simple explanation if Bid - Ask Spread is the different of value Bid and Ask in particular period of time
Any way we should be understand what is the meaning of BID and ASK

Bid :-

This is price buyer can maximum Can be deployed in certain time period.

Ask :-

This is the lowest price seller likes sell in certain time period.

So we can get formula,

Bid and Ask = Ask price - Bid price spread

Sources

This draft clearly show the Bid-Ask spread.
The different between ask and bid gives value of bid-ask spread.

1.3024 - 1.3022 = 0.0002

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

Bid - Ask spread is one of best factor understand the certain time period nature of flow of any business buyer/seller demand.Then we can get clear idea about trading of market particular time period.
The volume different in between Bid-Ask spread shows liquidity of trading.

High liquidity in market :-

The gap of Bid and Ask is become small its shows good competition of both parties.then automatically can seen wide range of trade in market.

Law liqudity in market :-

The gap in between Bid and Ask become high its simply seen there are difficulty of found buyers/sellers in market.this is one of example how effect to Bid and Ask spread effort to market.not only that much,
Its helping for get right decision,correct way in proper time for Entrepreneur in market.

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

a.) Calculate the Bid-Ask spread.

Bid price = $5.0
Ask price = $5.20
Bid-Ask Spread = ??

Formula
Bid-Ask Spread = Ask Price - Bid Price

Bid-Ask Spread = $5.20 - $5.0
Bid-Ask Spread = $0.20

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

% Spread = (Spread ÷Ask Price) x 100
% Spread = ($0.20÷$5.20) x 100
% Spread = 0.0384615 x 100
% Spread = 3.8461%

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

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

X= $0.2
Y=$0.4

higher liquidity= smaller spread
Law liquidity = higher spread

So X is smaller than Y,then X is showing higher liquidity in this case.

6. Explain Slippage.

Slippage is name of change prices during sell order time to place to buyer.law liquidity is one of the reason for make slippage.

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

If the fluctuation / variations of buyer / seller become profitable its call Positive slippage.
Example for positive slippage,If some buyer order $100 and during that time suddenly fluctuation that buying occured $ 99.5.
So this two prices different will come $0.5,and its call positive slippage to buyer.
Then seller also can get positive slippage,if $100 fluctuation occured $100.5 the different $0.5 positive slippage getting to seller.

Then lets see the Negative slippage .its opposite scenario of same situation describe before.This time buyer and seller become losses due to slippage.

Buyer order $100 and its fluctuation $100.5.Then $0.5 loss and its call negative slippage.If selling time $100 fluctuation to $99.5,seller will get $0.5 negative fluctuation.

CONCLUSION

Overall, bid and ask spread concept is great help to buyers and sellers in the market.Any buyer and seller should have a good understanding about bid-ask spread and it will help for well prepared for invest or trading.

Written by : @inudi
Cc:- @awesononso