Assalam.O.Alaikum!
Dear stemians:
I hope you are all fine and doing well with the grace of Allah Almighty who is the most beneficial and merciful to us.As the crypto new season is started from yesterday.So today I am also participate in this home work.
The topic which today I discussed in this lecture is about Bid Ask spread.Before starting this topic first of all I saw following questions below which is related about this topic.
Question No 1:
Properly explain the Bid-Ask spread?
Answer:
Before starting the main answer of this question firstly I discussed some other main important things about this topic.So first of all I talked about Bid- price and Ask-price.
Bid price:
The bid price is the highest price of a seller which he want to willing for selling.This term is used in trading market.
Ask price:
The lowest price which a buyer is want to willing for buying.The ask price is always greater than bid price.
Bid Ask spread:
The bid ask spread is mainly the difference between the two prices in which a seller is willing for selling and a buyer is willing for buying.For Bid Ask spread the following formula is given below.
Bid Ask spread=Ask price-Bid price
The bid Ask spread is also simply called the spread.
Question No 2:
Why is the Bid-Ask spread important in market?
Answer:
Bid ask spread is important which is used to negotiate the purchase of stock.The bid Ask spread is very important in market for trading.Bid ask spread is also most important for market trading investors.Bid ask spread is also used to determine the liquidity of a market.Bid ask spread is a measure of the trading risk of stock.Bid ask spread indicates the price level at which the buyers wants to buy and the sellers wants to sell.Bid ask price is also important to helps in good decision between the buying and selling during trading.The bid ask spread is also controlled by the forces of supply and also added for the demand.
Question No 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
Answer:
a) Calculate the Bid-Ask spread:
For known this mathematical expression of this question,firstly I tell you how we can calculate the Bid-Ask spread.
Bid-Ask Spread=Ask price-Bid price
First of all I put the given values in this equation.
Bid-Ask Spread=$5.20-$5
Bid-Ask Spread=$0.2
b)Calculate the Bid-Ask spread percentage:
%Spread=(Spread÷Ask price)×100
%spread=($0.2÷$5.20)×100
%Spread=3.85%
Question No 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
Answer:
a) Calculate the Bid-Ask Spread:
For known this question in mathematical expression I put the previous formula of Bid-Ask Spread.
Bid-Ask Spread=Ask price-Bid price
Bid-Ask spread=$8.80-$8.40
Bid-Ask Spread=$0.4
b) Calculate the Bid-Ask Spread in percentage:
%Spread=(Spread÷Ask price)×100
%Spread=($0.4÷8.80)×100
%Spread=4.54%
Question No 5:
In one statement,which of the assets above has higher liquidity and why?
Answer:
In the above statement the spread of Crypto X=$0.2 and the next spread of Crypto Y=$0.4.In this situation of the above statement the spread of Crypto X is smaller.For this we can say that the liquidity of Crypto X is greater than the liquidity of Crypto Y.
Question No 6:
Explain Slippage?
Answer:
The slippage us and order is executed at a price different from what was intended.In the trading market the price may change in every minute.The price is always change when we placed order In a market and also the change when the time an exchange or other market executes the order.Slippage is also known as when the execution price of a trade is different from its requested price.In other words slippage is also known as an act.
Question No 7:
Explain Positive Slippage and Negative Slippage with price illustration for each?
Answer:
For this purpose I talked about these two types of slippage one by one.
Position Slippage:
In the positive slippage the ask which has decreased in a long trade and on the other hand the bid has increased in a short trade.
For example:
If a trade was place for Crypto X to be bought at $120 and instead the trade was executed at $118,the positive slippage would be;
$120-$180=$2.
Negative Slippage:
Negative Slippage is occur when an order is filled at a less favourable price.In this situation the ask has increased in a long trade and the bid has decreased in a short trade.
Example:
If a trade is placed for Crypto Y to be brought at $200 and instead the trade was executed at 200.5 the negative Slippage would be;
$200.5-$200=$0.5
Conclusion:
From this lecture which is about Bid-Ask Spread I get a lot of information about trading.In this lecture I also learn about the process of buying and selling in a market.I also hope so this lecture will be useful for me in future.
Special Thanks:
@awesononso
Hello @isha46,
Thank you for taking interest in this class. Your grades are as follows:
Feedback and Suggestions
You misplaced the definitions of Bid and Ask.
You should really try to be clearer.
There are paragraphs that are not properly developed. Your paragraphs add marks to your presentation.
Thanks again as we anticipate your participation in the next class.
Thank you sir next time i will try my best to improve my mistakes