Whenever you’re about to trade hive tokens probably HBD for Hive and you tap on market at the top of the opened page you always see something like last price,24hr volume, Bid, Ask, Spread.
You will also see a chart like below:
Out of curiosity you might ask ”yourself what does that mean and is it of any significance?”.
Today I’ll Explain in details what it signifies.
A Bid/ Bid Price refers to the highest remittance proposed by a buyer for a token.
The Ask/Ask price In contrary to the Bid price refers to the lowest value a token is worth approximated by the seller. It basically means the smallest payment a seller is willing to take for a token.
The buyer always put the Bid price to an amount smaller than the **Ask price. The Bid-Ask Spread/Spread represents the significant difference between the two prices estimated by the Buyer and seller that is the Bid and Ask prices.
In Mathematical terms, Bid Ask Spread is obtained by subtracting the Bid price from the Ask price; Spread = Ask - Bid.
You can see from the above screenshot the prices of of Bid, Ask and Spread have been indicated As $0.542569, $0.542575 and 0.001% respectively.
From the Chart below the indicated prices is the representation of the Bid-Ask Spread.
The Green portion of the Chart indicates the Bid price and the red portion indicates the Ask Price and the small gap between the two is the Spread, in this case the Spread is very small because it’s 0.001 percent so it can’t be noticed in the Chart.
There’s never a condition where the Bid price will be equal to the Ask Price As both the buyer and seller wants favorable prices.
The Bid-Ask Spread indicating the Bid and Ask prices facilitates the decisions of a trader when making a trade.
It helps to ascertain whether a trade will obtain liquidity or not. If the Bid-Ask Spread is very small like the above case it implies that the dissimilarity in the prices of the buyer and Seller is not that much and an agreement can be reached easily.
In other circumstances if the Bid-Ask Spread is huge it implies that there’s much dissimilarities in the prices proposed by both buyer and seller and it’ll be difficult for both parties to reach an agreement and it’ll be difficult to obtain liquidity.
I hope this is of importance to the reader and thanks for reading.
