What is Spread

Guide for Beginners in Cryptocurrency
It is common for newcomers in the Crypto world to be confused about the meaning of spread when trading. However, once you know what the spread is, it gets easier to understand how it works and why it is important.

What is Spread in Crypto?
Spread is a difference between buy/ask and sell/bid price. In other words, it's the difference between the lowest price to buy and the highest available price to sell. Typically, the spread represents the transaction cost you incur when executing a trade. The size of a spread depends on various factors but mainly on the liquidity and volatility of the cryptocurrencies involved in Trading.

Now, you must be thinking what bid price and ask price means?
Simply put in words, the ‘Bid Price’ is the highest amount that buyers are willing to pay for a cryptocurrency at any given time.
The ‘Ask Price’ is the lowest amount that traders are willing to accept for a cryptocurrency at any given time.
Understanding the meaning and importance of spread helps you become a better trader!

Explaining Spread with the help of an Example
If the buying price for a trader is Rs 0.14 and the selling price is Rs 0.10 then the difference between selling and buying price i.e. Rs 0.04 is the spread.Spread = Buy/Ask price - Sell/ Bid price

How does the market spread impact Trading?
When trading in cryptocurrency, the spread is extremely important to a trader. Initially, the Trader will only consider the Trading fees, but after further consideration, they will realize that the Spread can have an impact on their Trading activity. When executing a Strategy, a trader must take into consideration the influence of a market spread to ensure that Trading is profitable.

Let's understand this with the help of an example:
Current Bid price = Rs 7500
Ask price = Rs 8000 ( Lowest offer)
Spread = Ask price - Bid price = 8000 - 7500 = Rs 500
Spread Percentage = 500 / 8000 * 100 = 6.25%
( The above Example does not take into consideration Trading Fees)

If you want to sell cryptocurrency, the bid price should be greater than Rs 8000 so that you can make a reasonable profit. Even if the coin's price rises, the Bid offer remains at 7800, and the Trader does not make a reasonable profit. To disregard such complexities for a new Trader, PocketBits has created a simple exchange platform where you can trade without the fear of incurring losses.

PocketBits is a user-friendly platform, particularly for new traders. It was created to assist newcomers in Crypto so that they do not incur losses while dealing with the complexities of cryptocurrency trading.

Conclusion
Crypto spreads are critical to understand if you’re looking to trade crypto and need to get it right the first time around. Keep this guide in mind next time you’re entering a trade, as crypto spreads are a huge advantage for experienced traders. Happy Trading!!