Bid-Ask Spread and Slippage Explained | Binance Academy
Bid-ask spread is the gap between the lowest sell order and the highest buy order. Slippage occurs when a trade settles for a different price than expected.
Key Takeaways The bid-ask spread is the difference between the highest bid price and the lowest ask price in an order book. It represents a hidden cost in every trade. Slippage occurs when a trade is filled at a different price than expected, usually due to low liquidity or high market volatility. Tighter spreads and lower slippage generally signal a more liquid, healthier market. On automated market makers (AMMs) and decentralized exchanges (DEXs), you can set a slippage tolerance to limit unexpected price deviations, but setting it too high can expose you to front running. Using limit…
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