Introduction
This post serves to socialize content on financial economics useful for those who trade in the world of cryptocurrencies, specifically on the bid-ask spread, before explaining what is related to the bid-ask spread, I will first outline some conceptualizations relevant to the subject, and that in my view are of vital importance to understand in detail the bid-ask spread.
Conceptualisation
Price
Based on the postulates of modern financial economics, from a theoretical construct, price is what bidders receive and what demanders pay.
Supply
There are different economic approaches to explaining the concept of supply, but the most intuitive and easily understood approach outlines that supply is the quantity of the asset or financial instrument that the seller offers for sale.
Demand
As opposed to supply, demand is the quantity of the asset or financial instrument that a person, be it an investor or a trader, wishes to buy.
Bid price (purchase)
Theoretically, the bid price is the highest price that a buyer is willing to pay for an asset or financial instrument.
Bid (ask) price
The bid (ask) price is the lowest price at which the seller is willing to sell its asset or financial instrument.
Bid-Ask Spread
The Bid-Ask Spread is the difference between the bid price and the ask price of an asset or financial instrument to be traded in a given market.
It is considered that the Bid-Ask Spread is one of the main components of the price implicit in a negotiation, it is important to emphasise that in any financial market, whether physical or virtual, imbalances or differences are generated between supply and demand, an element that is usually considered as the kinetic force that gives life to the markets, basically because when differences are generated between supply and demand, conditions are created that allow both the buyer and the seller to be able to negotiate.
SOURCES CONSULTED
➊ Financial Pipeline Staff The Importance of Bid-Ask Spread. Link
➋ Timothy Koch Slippage and the choice of market or limit orders in futures trading. Link
Link
OBSERVATION:
The cover image was designed by the author: @lupafilotaxia, incorporating image background: Source / Author: Pixabay, 2016
Greetings friend @lupafilotaxia, no doubt through these lines of writing we can observe basic terms that all of us as investors must know and manage if we want to be profitable in our economy. Greetings
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Hello friend @madridbg
Correct an excellent methodology of assertive management, is to make operations knowing the supply and demand differential, is one of the elements little considered when making investments, therefore, I believe that a way to collaborate is to socialize this type of content.
Best regards, be well.
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Excellent glossary of fundamental terms that we must all use to understand the functioning of the market and to be able to operate in a more efficient way in it.
Thank you very much for a very valuable contribution my dear friend @lupafilotaxia
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Hi @lupafilotaxia
You show in an easy way basic concepts that every person who wants.to engage in virtually any buying and selling activity should know.
Thanks for the information
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Hello friend @josevas217
The bid-ask spread, is one of the elements little considered when making investments, therefore, I think one way to collaborate is to socialize this kind of content. Thanks for your comment.
Best regards, be well.
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Greetings dear friend. Very basic but at the same time very important concepts that you present to us and that all of us who are involved in cryptocurrency trading should handle. Since supply and demand are the axes of a market economy, and the relationship between them determine the behavior of the price of an asset.
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Hello friend @emiliomoron
Not only the supply and demand itself, but the supply and demand differential that is being generated, is one of the elements little considered by investors.
Best regards, be well.
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Hello friend @lupafilotaxia.
A very important economics topic you share with us about supply and demand.
Greetings friend and thanks for sharing relevant information.
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Hello friend @carlos84
As I mentioned before, the supply and demand differential is one of the elements little considered when making investments, therefore, I think that one way to collaborate is to socialize this type of content.
Best regards, be well.
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@tipu curate 5
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Upvoted 👌 (Mana: 0/5) Get profit votes with @tipU :)
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