Understanding Spreads & Slippage - A Trader's Guide! š¤
š¢ 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! š
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. š§
$BNB
A wide spread signals low liquidity - fewer buyers and sellers. You'll see this with small cap altcoins. š Market makers provide liquidity using spreads to profit - buying low and selling high. š°
$ETH
š¢ What's slippage? This happens when your trade executes at a different price than expected. š± 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. š½ļø It's common with smaller coins. The volatility also causes prices to shift quickly. š¢
To avoid slippage, use limit orders rather than market orders. š¤ But even limit orders can experience slippage if the market moves fast! šŖļø
Checking order book depth and spreads helps gauge liquidity conditions before trading. š Understanding slippage and spreads helps make better decisions! š§
