Spot Trading and Execution · Crypto Trading Guide

A narrow spread does not guarantee deep liquidity. Calculate the actual average fill when an order consumes several price levels.

Read both sides

The best bid is the highest displayed buying price and the best ask is the lowest displayed selling price. Their difference is the quoted spread. Depth describes quantities available at different levels. Orders can change or disappear, and one exchange’s book does not represent the entire market.

Calculate the average fill

Consider a hypothetical ask book with 2 coins at $100, 3 at $101 and 5 at $103. A market purchase of 6 coins consumes the first two levels and 1 coin at $103, assuming nothing changes. Total cost is $606, giving an average price of $101. Relative to the initial $100 best ask, the execution is $6 more expensive in total, before fees.

Use an explicit benchmark

Slippage depends on the benchmark, such as the arrival midpoint, quoted ask or decision price. Market impact is the price movement associated with trading, while other participants and general market movement can also affect the fill. State the benchmark and time. Do not add the same spread cost twice when actual fill prices already include crossing the spread.

Evaluate size before submitting

Compare the intended quantity with visible depth and recent activity. A large displayed order is not a commitment to remain available. Splitting an order can reduce immediate impact but introduces timing and nonexecution risk. For a simulated trade, record the snapshot, planned quantity and weighted price. Then test a thinner book to see whether the trade still fits its risk budget. A volume headline alone cannot answer that question.

Try it yourself

An ask book has 4 units at $50 and 6 at $51. What is the average price for buying 7 units?

Show the worked answer

Total consideration is 4 × $50 plus 3 × $51 = $353. Dividing by 7 gives about $50.43 before fees.

Further reading

Educational material. Examples and rates are hypothetical, not trade recommendations. Product terms, eligibility and risks vary by venue and jurisdiction.

Continue learning