Understanding Spreads & Slippage - A Trader's Guide! 🤑
🟢 What's the spread? It's the difference between the buy and sell price quoted for an asset. A high spread means you pay more to buy and get less when selling - so you want it LOW! 📉
For example, if BTC is quoted at $10,000 bid and $10,100 ask, the spread is $100. Popular coins like BTC and ETH have very tight spreads due to high liquidity. 💧
$BNB
A wide spread signals low liquidity - fewer buyers and sellers. You'll see this with small cap altcoins. 👎 Market makers provide liquidity using spreads to profit - buying low and selling high. 💰
$ETH
🟢 What's slippage? This happens when your trade executes at a different price than expected. 😱 For instance, your market buy order goes through at $10,100 instead of $10,000.
Slippage occurs due to low liquidity. Your big order eats up the existing orders, moving the price. 🍽️ It's common with smaller coins. The volatility also causes prices to shift quickly. 🎢
To avoid slippage, use limit orders rather than market orders. 🤓 But even limit orders can experience slippage if the market moves fast! 🌪️
Checking order book depth and spreads helps gauge liquidity conditions before trading. 👀 Understanding slippage and spreads helps make better decisions! 🧠
