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This is @ns-porosh from Bangladesh 🇧🇩

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Introduction

How are you all? I hope you are well by the grace of God.I am well with your prayers and mercy God's grace.At first of all thank you to the sir @awesononso. Your lesson provides a lot of information on homework tasks.

Properly explain the Bid-Ask Spread.

Trading markets usually have buyers and sellers for buying and selling assets and they have a fixed price. Sometimes buyers usually buy assets at the seller's price and sometimes buyers do not buy assets at the seller's price. This system is like a bid-ask price in the cryptocurrency market.

Basically there are two types of prices in the trading market called bid price and ask price for each asset. To understand the bid-ask spread, we first need to understand what the bid price and the ask price are.The bid price and the asking price are discussed below:

• Bid Price

The bid price is the highest price. Where a buyer is willing to purchase with the highest price for an asset or product.

• Ask price

The asking price is the lowest price. Where an asset seller wants to sell an asset or product at a given time to stabilize the market.

• bid-ask spread

The bid-ask spread can be defined as follows from the discussion above:

The difference between the bid price and the asking price is the bid-ask spread.

Mathematically, bid-ask spreads mean:Bid-Ask Spread = Ask Price- Bid Price.

For example:
Suppose a seller is willing to sell his assets for $ 9 but a buyer is willing to buy his assets for $ 8. Here $ 9 is the asking price and 8 is the bid price. The difference between the asking price and the bid price is ($ 9- $ 8) = 1. This 1 $ is the bid-ask spread.

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

Bid-Ask spreads are a very important issue for traders in the trading market. Bid-ask spreads help to know the attitude of traders in the market. These bid-ask spreads determine the trading volume for traders. These spreads also determine how traders can get better prices by buying and selling their assets or products in the market.

Bid-Ask Spread Trading signals liquidity in the market. Even bid-ask spreads determine when traders should place an order to buy or sell assets in the trading market. Basically those who are real trading traders always use the bid-ask spread system in their business. Because real trading traders do not want their capital to be zero or business to be lost.

• For example:
  When the bid-ask spread is seen at short intervals, it is understood that the supply in the asset market is very low but the demand is high for which there will be good competition. During this time assets will be sold at higher prices and spreads will signal higher liquidity. Again, when bid-ask spreads are seen at high intervals, the supply of a given asset is very high but the demand is low. At this time, the asset will be sold at a lower price for which the spreads will signal less liquidity. If demand and supply are balanced in the market then the market will be fluid and balanced so that traders will speed up their trades.

Lastly I would like to say that bid-ask spread is very important for traders to manage their business work properly and make the right decision at the right time.

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.

A:-The bid-ask spread calculation is given below:

Crypto X

We know, bid-ask spread = bid price-ask price

Here: -
Bid price=$5.00,
And asking price = $ 5.20

Therefore; bid-ask spread = ($ 5.20- $ 5.00)
= $0. 20

The bid-ask spread is $0.20

B:- The percentage bid-ask spread calculation is given below:

The formula is: -% bid-ask spread = (bid-ask spread÷ask price) x100

Here: -

Above we get the bid-ask spread = $ 0.20.
Ask price = $ 5.20

Therefore

% Bid-ask spread = ($ 0.20 ÷ $ 5.20) x 100
% Bid-ask spread = 0.03846153846 x 100
% Bid-ask spread = 3.846%

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.

A:-The bid-ask spread calculation is given below:

Crypto Y

Here: -

Ask price = $ 8.80
Bid price = $ 8.40

Therefore,
Bid-ask spread = (bid price-ask price)
($ 8.80- $ 8.40),
Bid-ask spread = $ 0.40

B:-The percentage bid-ask spread calculation is given below:

We know,% Bid-ask spread = (bid-ask spread ÷ask price)x100

Here: -

Above we have bid-ask spread = $ 0.40 and
Ask price = $ 8.80 received

Therefore

% Bid-ask spread = (bid-ask spread $ 0.40 $ 0.40 ÷ ask price $ 8.80) x100
% Bid-ask spread = 0.04545454545 x 100
% Bid-ask spread = 4.54%

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

The liquidity of Crypto X is higher than the liquidity of Crypto Y. Because we know from the above discussion that if the spread of wealth is more then the liquidity of wealth will be less and if the spread of wealth is less then the liquidity of wealth will be more. Similarly, observing the spread of Crypto X and Crypto Y shows that the spread of Crypto X is less than the spread of Crypto Y. So it can be said that Crypto x has more liquidity than Crypto Y.

Explain Slippage.

The crypto market is always volatile in nature. Crypto markets The prices of crypto assets fluctuate dramatically. The price of crypto assets in the market fluctuates on liquidity.

Slippage is a price variable that can affect the place of order in the market by traders. Side effects caused by slippage in the cryptocurrency market can occur at any time. When a trader places an order for buying and selling assets in the cryptocurrency market, there is a short interval between the time the order is placed or activated and the order is executed or activated. And prices fluctuate during this period. The difference between the established price and the effective price of the order during the trade of slippage traders. If the value of the asset differs from the value set at the time of transaction, it is called a slippage. There are very few traders when the market slips because it happens in large spreads over time. It also spreads widely due to its low liquidity. Slippage basically indicates low liquidity and low trading volume.

Example:

Suppose I order a cryptocurrency A for sale at a price of $ 10. A buyer accepted the order but some time passed and this time the price of that cryptocurrency A changed to $ 10.5, which means the price went up. This difference in price is the slippage.

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

Positive slipage:

Of the two types of slippage, positive slippage is one type. Positive slippage basically works for traders. This means that a positive slippage allows a trader to buy assets at a lower price and sell assets at a higher price. Positive slippage occurs when the order is completed at a price higher than the seller's request and the seller benefits. In a word, a trader can benefit from such slips by buying or selling crypto assets.

Example:

• For purchase orders
  I ordered 45 Trx purchases for $5. When the order was executed I saw the market suddenly slip. As a result I get 50 Trx for $5.That means (50-45)$= 5$Trx is my gain. This is a positive slippage.

• For sale order
  Again in the same way I set the price of 45 Trx at $ 5 to sell 45 Trx. When the order was executed I noticed the market suddenly slipped and I got $ 6 for 45Trx. That is, I get ($ 6- $ 5) = 1 $. This is a positive slippage.

Negative slippage

One of the two types of slippage is the negative slippage.Basically negative slippage is the opposite of positive slippage.Negative slippages work against traders. Negative slippage occurs when traders' orders are fulfilled at a price different from the contract price. Traders face losses mainly due to this slippage.

Example:

• For purchase orders
  I ordered 35 Trx purchases for $4. When the order was executed I saw the market suddenly slip. As a result I get 31 Trx for $4 Meaning 35-31= 4Trx is the loss.This is a negative slippage. I lost 4 trx due to negative slippage.

• For sale order
  Again I set the price of 35Trx at $ 4 to sell 35 Trx. When the order was executed I saw the market suddenly slip and I got $ 3.5 for 35Trx. That means I have ($ 4- $ 3.5) = $. 5 loss.This is a negative slippage.

Conclusion

From this lecture I learned a lot about bid price, asking price and bid-ask spread. I think bid-ask spreads are a very important issue for those doing business in the world of cryptocurrencies. If one adheres to the bid-ask spread system while trading in the world of cryptocurrencies, one can avoid additional losses. Also from this lecture I learned about slippage. Slippage occurs when traders place orders but if those orders are fulfilled differently. Slippage can result in losses and gains for traders.Thank you very much sir @awesononso for this beautiful lesson.

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