Steemit Crypto Academy [Beginners' Level] | Season 4 Week 1 | The Bid-Ask Spread by @obikay

Properly explain the Bid-Ask Spread.

The bid-ask spread refers to the distinction that is between the bid price and therefore the asking price for a precise investment.
In different words, it represents the distinction between the utmost quantity a client is willing to pay for an asset and also the minimum worth the seller is willing to take for the asset.
The bid ask spread is an idea that is extensively utilized in trading, particularly referring to equities.
The bid price, or the price that the purchaser is ready to pay, and the bid price, or the price that the seller is ready to sell, are important in determining the market for investment. It is likewise surely known as the Spread.

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

The bid-ask spread works extremely well as to calculate the demand and supply for specific commodity.
Considering that the bid can be said to symbolize demand and the offer to represent the supply for an item, it can be possible that the market industry action represents a shift in supply and demand mainly because these two prices increase further apart.

The length of the bid-ask will range from one asset to another, especially due to every asset's differing liquidity. The distribution of the bid-ask is a real indicator of market liquidity. Thus, the spread will be smaller in a liquid market.

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

a.) Calculate the Bid-Ask spread.

The calculation would be:
= $5.20 - $5
= $0.20 that's the Bid-Ask price

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

Spread = (Spread÷Ask Price) x 100
= ($0.2÷$5.20)x 100
= 3.85% been the spread.

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

a.) Calculate the Bid-Ask spread.

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

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

= ($0.4 / $8,80) x 100

%Spread = 4.5% will be the spread

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

Therefore if
Crypto X =$0.2
Crypto Y = $0.4
If crypto X been 0.2 which is small. This implies that the buy/sell prices been close, there is more liquidity with Crypto X.

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Explain Slippage.

Slippage is when there is a difference in price between the original order amount in the market and the actual price paid per share.
Slippage can happen within any trading circumstance and it takes place in both cryptocurrencies and traditional assets.
The slippage price difference can be much or fewer than the main market order.

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

Positive slippage

When real executed value is smaller than the expected value for the purchase order, it is a positive slippage due to the fact that it offers the trader at a better rate than originally expected. For instance, placing a trade for coin X to be purchased at $160 and instead the trade changed and was carried out at $158, the Positive slippage is $160 - $158 = $2.

Or placing a trade for coin Y to sell at $105 and instead the trade was carried out at $106, the Positive slippage is
$106 - $105 = $1.

Negative slippage

When the real executed value are higher than the expected value for the purchase order it is a negative slippage due to the fact that it supplies a trader a lower price than the originally planned. For instance, placing a trade for coin Y to be purchased at $50 and was later carried out at $50.50, the negative slippage is
$50.50 - $50 = $0.50

Or placing a trade for coin X to sell at $50 and later the trade was carried out at $49.8, the negative slippage
$50 - $49.8 =$0.2