Trading
Spread
The difference between the highest bid (buy) price and lowest ask (sell) price for a trading pair. Tighter spreads indicate better liquidity and lower trading costs.
Last updated: January 5, 2025
What is Spread?
The spread is the difference between the best bid (highest price buyers will pay) and best ask (lowest price sellers will accept). It represents an immediate cost of trading and indicates market liquidity.
Spread Calculation
Formula
Spread = Best Ask - Best Bid
Spread % = (Ask - Bid) / Ask × 100Example
- Best Bid: $69,995
- Best Ask: $70,005
- Spread: $10 (0.014%)
Why Spreads Exist
Market Makers
- Provide liquidity
- Profit from spread
- Take on inventory risk
- Narrow spreads in liquid markets
Supply and Demand
- More traders = tighter spreads
- Less traders = wider spreads
- Market efficiency indicator
Spread and Trading Costs
Immediate Impact
When you buy at market:
- Pay the ask price
- If you immediately sell
- Get the bid price
- Loss = spread
Real Cost Example
Buy 1 BTC at $70,005 (ask):
- Immediately sell at $69,995 (bid)
- Instant loss: $10
- Plus any trading fees
Spread Comparison
Typical Spreads
| Asset | Exchange | Typical Spread |
|---|---|---|
| BTC/USDT | Binance | 0.01% |
| BTC/USD | Coinbase | 0.02% |
| ETH/USDT | Binance | 0.01% |
| Small altcoin | Various | 0.5-2%+ |
Tight vs Wide Spreads
Tight Spreads (Good)
- Liquid markets
- Major pairs
- Active trading hours
- Lower trading costs
Wide Spreads (Costly)
- Illiquid markets
- Small cap tokens
- Off-hours trading
- Higher effective costs
Factors Affecting Spread
Liquidity
- More liquidity = tighter spread
- Major pairs tightest
- Small caps widest
Volatility
- High volatility = wider spreads
- Market makers increase risk buffer
- News events cause widening
Time of Day
- Trading hours tighter
- Overnight wider
- Weekend variation
Exchange
- Major exchanges tighter
- Smaller exchanges wider
- Compare across platforms
Spread on Different Exchanges
Binance
- Tightest spreads overall
- Highest liquidity
- Best for large orders
Coinbase
- Good spreads for major pairs
- Institutional liquidity
- Wider on smaller assets
Kraken
- Competitive spreads
- Good depth
- Reliable execution
Minimizing Spread Impact
Use Limit Orders
- Set your own price
- No spread cost
- May not fill immediately
Trade Liquid Pairs
- BTC, ETH pairs tightest
- Avoid illiquid tokens
- Check spread before trading
Compare Exchanges
- Spreads vary
- Same pair, different costs
- Use aggregators
Trade During Active Hours
- US/EU trading hours
- Avoid weekends for large trades
- Monitor spread in real-time
Spread in Different Markets
Spot Markets
- Direct spread visible
- Order book shows it
- Standard trading cost
Futures Markets
- Usually tighter spreads
- High leverage trading
- Different liquidity dynamics
DEX (AMM)
- No traditional spread
- Price impact instead
- Pool size determines cost
Hidden Spread Costs
Exchange Markup
Some platforms add spread:
- “No fee” exchanges
- Hidden in spread
- Compare total cost
Payment Methods
Credit card purchases:
- Often worse rate
- Hidden spread built in
- Higher effective cost
Professional Trading
Market Making
- Profit from capturing spread
- Provide liquidity
- Requires sophisticated systems
Arbitrage
- Exploit spread differences
- Cross-exchange trading
- Usually automated
Checking Spread
Before Trading
- Look at order book
- Note bid and ask prices
- Calculate spread percentage
- Compare to other platforms
- Factor into decision
Ready to Start Trading?
Now that you understand spread, explore the best exchanges to begin your crypto journey.