Spread and slippage: the hidden costs of trading

When people compare trading costs they look at fees. Two other costs are often larger: the spread and slippage.

The spread

The spread is the difference between the best ask (lowest sell price) and the best bid (highest buy price). If you buy at the ask and immediately sell at the bid, you lose the spread.

• Popular pairs such as BTC/USDT usually have a very small spread.
• Small coins can have spreads of a percent or more.

You can see bids and asks on any Spot screen on XFasil, for example BTC/USDT.

Slippage

Slippage is the difference between the price you expected and the price you got. A market order fills against the best orders first; if it is larger than the amount waiting at the best price, the rest fills at worse prices. The average price moves away from the quote.

Slippage grows when:

• the order is large compared with the depth near the price;
• the market moves quickly;
• liquidity is thin, for example at night for small coins.

A worked example

Suppose the best ask is 100.00 with 1 coin available, the next ask is 100.20 with 2 coins, and the next is 100.50. A market order for 3 coins buys 1 at 100.00 and 2 at 100.20 — an average of about 100.13, not 100.00. The same order in a deeper book could have filled entirely at the first price. The numbers are illustrative; the mechanism is the same on every order book.

Reducing these costs

• Prefer liquid pairs.
• Use limit orders when immediate execution is not required.
• Split large orders.
• Check the order book depth before trading — see Reading a depth chart.

This is general education. XFasil does not provide trading operations or investment advice; the Spot and Futures screens show market data only.