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Cryptocurrency Trading Strategies: Understanding Types of Spreads

In the fast-paced world of cryptocurrency trading, the difference between success and failure can often come down to a single moment. The right strategy at the right time can give you an edge over your competitors, while failing to recognize hidden dangers or entry points can catastrophically undermine even the most promising setup. The spread is the difference between the Ask price and the Bid price of an asset. It’s also known as market, bid-ask, or trading range – and it’s one of the most important things you need to understand before you start trading any sort of security. This article will explain what a spread is in general terms, how it works with regards to cryptocurrency trading, and examples of different types of spreads that you might encounter as an investor.

What Is a Spread in Trading?

A spread is the difference between the Ask price and the Bid price. The Ask price is the price at which someone is willing to sell you an asset. The Bid price is the price at which someone is willing to buy that same asset from you. It’s worth noting at this point that many traders prefer to use the terms bid and ask rather than sell and buy. The terminology can be confusing since someone who is selling is also asking for a price. This is because a trader can set the price at which they are willing to buy or sell an asset. The spread is the difference between the two prices. It represents the profit that the seller is looking for when they set their price. The trader who buys the asset at the ask price and then sells it at the bid price makes this difference as profit. Choosing a reliable and user-friendly trading platform – such as BitAlpha AI – can be immensely helpful when you first start trading, as it can help you understand different crypto trading terms.

Strategies to Help You Survive the Crypto Spread

Trading with the Trend 

If you want to trade with the trend, you should buy an asset when it’s low and sell when it’s high. The problem is that it’s often difficult to predict when an asset will be at its low and when it will be at its high. The best way to combat this is to look for strong formations such as the ascending triangle pattern. When you see these types of patterns forming, it’s a good indication that an asset is about to make a major move. 

Using Technical Analysis 

Technical analysis is the process of analyzing an asset’s trading chart to predict where the price will go next. A trading platform such as BitAlpha AI can also help you perform market technical analysis. It’s a good way of determining the general trend of a particular asset. It can also help you identify various trading patterns such as support and resistance levels and candlestick reversal patterns.

Types of Spreads: Knowing the Difference Can Be Key to Success

The Bid-Ask Spread 

The bid-ask spread is the difference between the lowest price that someone is willing to buy an asset and the highest price that someone is willing to sell it for. It’s what a trader is up against when they attempt to buy or sell an asset. The wider the spread, the harder it is to buy or sell an asset quickly. This is why understanding the types of spreads is so important. When you buy or sell an asset, you are expected to pay the bid price. At the same time, when you sell an asset, you are expected to sell it at the ask price. The difference between these two prices is the spread. 

The Net Asset Value (NAV) 

The net asset value or NAV is basically the total value of all the assets in an investment fund. The NAV for an investment fund is calculated by adding up the total value of each asset and then subtracting operating costs. The NAV is important because it’s used to determine the price at which funds are bought and sold. If you buy shares in a fund, the price will be the NAV plus any dividends that have been paid out since your last purchase. If you sell shares in that same fund, the value will be the NAV plus any dividends that have been paid out since your last sale. The NAV is also used to determine the price that investors who want to buy into the fund are expected to pay.

If you’re looking for an efficient trading platform check out:

https://bit-alpha.ai/

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