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Detailed Explanation of Bid-ask Spread and Slippage

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  The bid-ask spread is the difference between the lowest asking price and the highest bid price of an asset. Assets like Bitcoin typically have smaller spreads than assets with less liquidity and volume. Slippage occurs when the average price at which a trade settles differs from the initial request. Slippage usually occurs when executing a market order. If liquidity is insufficient to support the order or there is volatility in the market, the final order price may change. To combat slippage on low-liquidity assets, try splitting your order into several smaller orders. Introduction When buying and selling assets on a cryptocurrency exchange, the market price is directly affected by supply and demand. In addition to price, important factors to consider are volume, market liquidity, and order type. Depending on market conditions and the type of order selected, a trade may not be executed at the desired price. As buyers and sellers negotiate, a price difference (i.e., bid-ask spread) is