I've noticed that many newcomers to crypto don't fully understand how the spread between the buy and sell prices actually works. This is an important point that affects trading results more than it seems at first glance.

Here's the gist. When you look at the order book, you see that the highest price someone is willing to pay for an asset and the lowest price someone is willing to sell at do not match. There is always a gap between them. This gap is called the bid-ask spread. Essentially, it’s the difference between what buyers are willing to pay and what sellers are asking.

On major exchanges, this spread is usually quite narrow due to high trading volume and competition among participants. But when the market is volatile or liquidity drops, the spread can widen significantly. The simple logic is: the more people trade, the narrower the bid-ask spread, because buy and sell prices converge. On low-liquidity markets, the situation is the opposite.

How is it calculated? Just subtract the best bid price from the best ask price. For example, if the highest someone is willing to pay for Ethereum is $1570, and the lowest someone is willing to sell at is $1570.50, the spread is 50 cents.

Why does this matter? Because these small gaps between buy and sell prices constantly eat into your profit. You buy at a higher price than ideal and sell at a lower price. Over time, these pennies add up to serious money, especially if you trade frequently.

Let me give a specific example. Imagine you're trading the coin ABC with a fair value of $0.35, but the spread is $0.02. You buy at $0.36 (best ask in the order book), and you can sell at a maximum of $0.34 (best bid). That means the price needs to rise by a full two cents—about 5%—just for you to break even. Active trading makes this a significant factor in your overall results.

That’s why it’s important to choose pairs with good liquidity and keep an eye on how the bid-ask spread changes depending on market conditions.