Frequently Asked Questions covered in this article:
- Why is there a difference between the buy and sell price?
- Why do prices vary across different platforms?
- What is an order book?
- Why does the price change when my order size changes?
Why is there a difference between the buy and sell price?
When trading assets in any open market (i.e. cryptocurrency, equities/shares, etc) there is always a difference in price between the buy and sell rate. This difference is commonly referred to as the ‘spread’. This difference between the price buyers are willing to pay for an asset and the price sellers are willing to sell the same asset for. This price difference is never a fixed amount and will always fluctuate in real time and in line with international order books.
Why do prices vary across different platforms?
Every single coin listed on CoinSpot is traded globally, therefore there are often many people trading these coins around the world. Across exchanges there are different trading pairs available, different rates/prices and different numbers of people trading. Each of these elements will cause prices to vary between exchanges. While it is important to take note of the rate and spread, there are often additional costs and fees associated with other exchanges. These costs may not initially be clear when directly comparing prices. Some examples of these are shown below;
- Deposit fees: High AUD deposit fees often charged on international platforms.
- Deposit delays: No instant deposit options, meaning you have to wait hours or even days to access your funds.
- Compulsory Forex conversion: Some platforms force users to convert their AUD into USD when users deposit AND when they withdraw. This can take 1-5% away from your initial deposit value and take a percentage of your withdrawal too.
- Restrictive trading pairs: Flexible trading is not possible on all platforms. To trade into the coin you want, a user may have to complete multiple trades instead of just one.
- Time-cost trade off: Setting orders and making multiple trades takes considerable time compared to just one trade with CoinSpot.
- Missed market opportunities: Having to set orders that are not guaranteed often results in missed opportunities to buy or sell at a particular price.
- High withdrawal fees: Many exchanges cannot provide AUD withdrawals and if they do they may charge high fees when withdrawing AUD into your bank account. CoinSpot charges no fees for withdrawing your AUD.
Some platforms advertise low trading fees, however are often additional costs they fail to mention, that can accumulate and impact your profit. CoinSpot users get a much simpler experience with free deposit options, free withdrawals & one clear fee of only 1% for instant trading.
What is an order book?
An order book refers to a list that shows what buyers and sellers are willing to buy and sell coins for and the amount of a coin available at each price. The information shown on an order book will be the coin traded, quantity of each order & rate requested.
Below is an example of an order book trading Ethereum (ETH):
The depth of an order book dictates what price you have to reach into the order book to purchase the amount of coins you require. In the example above, if you wanted to buy 3 ETH, you would need to place an order at the rate of $210 per ETH, meaning you would purchase 2 ETH at $200 and 1 ETH at $210.
Why does the price change when my order size changes?
The price is set by the open buy and sell orders that are available on the markets used to fulfil your orders. The more a user wants to buy or sell, the further we have to go into the order book to fulfil the order.
The price changes as we adjust for depth of the order book and to ensure we can execute your order instantly. Using the above order book as an example, if you wanted to buy 1 Ethereum you could purchase at the market rate for $200 (as there are two sell orders currently placed at $200). But if you wanted to purchase 3 Ethereum, the price would be $200 for the 2 and $210 for the 3rd, so the price displayed would be $203.33.
The further in the order book an order needs to be placed, the more complex the calculation. If you wanted to purchase 4 ETH, we would need to place an order deeper into the order book to purchase a further 0.5 ETH at a rate of $220 and $300. This would increase the average price to $218.
This is where CoinSpot’s optimised system reduces the risks and complexity in the process. The CoinSpot exchange engine scans global order books within a large network of liquidity providers and provides you with one locked in price to complete your order. This removes surprises when you have to go deeper into the order book to execute your order and will also remove the risk of price slippage. Just one price, one small fee and your coins are in your wallet instantly.
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