Hello crypto traders! Continuing the topic about the types of orders in the market, I would also like to talk about the types of prices in trading – Bid, Ask, and Last in 3commas. In this video and a text description of it, I will explain each type of price in cryptocurrencies, their characteristics, and differences among themselves. And also what types of prices should be set when creating Take Profit and Stop Loss. Let’s start!

Type of prices in crypto

First, imagine a typical market. When buying something on the market, you have two options: buy the product at the price that the seller offers (Ask) or try to bargain (Bid) to bring down the price. In the first case, you are guaranteed to receive the goods at the stated price. In the second case, it is possible to get the goods at a better price or even leave with nothing. In principle, the execution of orders on the crypto market is the same.

Bid – the price at which the trader is ready to buy cryptocurrency, and Ask  – the price at which the trader is ready to sell it. Spread – is the difference between the Ask and bid prices. In the first case, you want to buy only at the stated or better price. In the second case, you seem to be telling the exchange that you are going to buy the declared volume at any price currently available.

Usually, on the crypto exchange, we sell at the Bid price and buy at the ASK price, that is, the sell deal is closed at the Ask price, and the buy deal is closed at the Bid price. We always see the Bid price on the chart. If you are going to buy, then usually buy at a slightly higher price. There is a so-called Depth of Market (Order Book) – a list of prices and orders, where all Bid and Ask prices are visible.

Bid – represents the cost of the 1st order to BUY from the Order Book on the crypto exchange. ASK – represents the cost of the 1st SELL order from the order book. Last – the cost of the last transaction on the exchange, be it a buy or sell order. Usually, we see the Last prices on the chart. The fact is that the Ask price is usually higher than Last, and the Bid price is lower than Last. But these prices are the best that the exchange offers with a market Take Profit order.

Bid price in cryptocurrency

Binance, Kucoin , or another crypto exchange rely on buy order prices from the Order Book when a trader closes a Long position by selling tokens. Therefore, it is advisable to use the Bid price with Take Profit when the cryptocurrency is growing. Conversely, the exchange takes sell orders from the Order Book when a trader closes a Short position by buying tokens. In this case, it is better to use the Ask price to close the Take Profit when the coin falls.

Conditional order to buy tokens is recommended to use with Ask price, and a Conditional order to sell tokens is recommended use with the Bid price. For example, on the chart, the price is 100 USDT per 1 ETH, but the first buy order can still be at 97 USDT. Or there is an order to buy a Bid of 90 USDT and some trader buys all ETH coins up to 100 USDT using one large market buy, but no one places a buy order above 100 USDT.

Even if the chart now shows the price of 100 USDT, the Bid price is still 90 USDT. You can see these prices yourself in the Order Book during trading. Open any crypto trading pair, and you will see the difference in prices between Last (the last price that is on the chart), Bid (the price is below the current price), and Ask (the price is higher than the current price). This is especially noticeable with tokens on a 1 minute timeframe and a small volume.

If you want to buy or sell at an exact price, you should use Limit Orders. They will be visible in the Order Book, so when someone buys a large Market order, your Limit order will also be filled. Keep in mind that orders with Trailing Buy, Trailing Sell, and Trailing Take Profit are executed by the Market, so the same principles apply to them as to Ask and Bid. Therefore, it is worth turning off Trailing and using Limit orders if you do not want to miss trades.

Ask price in cryptocurrency

Conditional order also follows the current crypto price – Ask or Bid. By the way, there is a separate video about Market, Limit, and Conditional Orders. This type of order helps to avoid freezing your money and not showing your orders in the order book to other traders. However, if you want to catch the right price right now, it is better to use a Limit Order.

There is also a Conditional Limit Order. Such an order consists of 2 parts. 1) Order price – the price of a Limit order that appears in the order book when the token price reaches the required condition. 2). The notional price is the price that determines when a Limit order is to be placed but works on the principle of Market Orders.

A Conditional Limit Order helps control the worst tokens price at which you agree to buy or sell tokens. However, such an order must be executed sometime. A Conditional Limit Order can get stuck in the order book when the price quickly passes your price level or the price does not reach your level at all.

For this order to be triggered accurately, the order price is placed slightly below the Conditional Sell Order Price and slightly above the Conditional Buy Order Price. But you shouldn’t place the price significantly lower for a buy order and the price is much higher for a sell order. In this case, the price needs to make a larger move in order to reach your order and execute it. Besides, there is a possibility of your order getting stuck in the Order Book.

How is the working Bid price

Tracking the price by Bid – the price will begin to be determined by the first buy order in the order book. You bought 1 Ether at 100 USDT and placed Take Profit + 5%, that is, at the price level of 105 USDT. The Ether price began to grow and we can observe the following. The first order in the Order Book (Bid) is 102.25 USDT, and the first order in the Order Book (Ask) is 103 USDT. What happens – the price of the coin rises, there is an active buying. Your Take Profit is pending.

The price grows further for the second time. The first order in the Order Book (Bid) is 103.56 USDT, and the first order in the Order Book (Ask) is 107 USDT. What happens – some trader made a big buying of ETH, bought all orders up to the price of 107 USDT, but there were no changes in the Order Book. Your Take Profit is also pending.

The price grows further for the third time. The first order in the Order Book (Bid) is 104.66 USDT, and the first order in the Order Book (Ask) is 105 USDT. What happens – the price of the coin rises, there is an active buying. Your Take Profit is still pending.

The price grows further for the fourth time. The first order in the Order Book (Bid) is 105 USDT, and the first order in the Order Book (Ask) is 105.02 USDT. What happens – the price of the coin rises, but this time the order we need for Bid with a price of 105 USDT appears in the Order Book. Your Take Profit is closed at the market price of 105 USDT since the terms of the deal are met.

Now let’s look at an example using Stop Loss with Bid price tracking. You bought one Ether at the price of 100 USDT, and set the Stop Loss to -5%, at the price level of 95 USDT. The price of Ether began to fall and we see the following in the crypto market. The first order in the Order Book (Bid) is 98.47 USDT, and the first order in the Order Book (Ask) is 99 USDT. What happens – the price of the coin falls, there is an active selling. Your Stop Loss is pending.

The price falls further for the second time. The first order in the Order Book (Bid) is 96.99 USDT, and the first order in the Order Book (Ask) is 97 USDT. What happens – the price of the coin falls, there is an active selling. Your Stop Loss is pending.

The price falls further for the third time. The first order in the Order Book (Bid) is 94 USDT, and the first order in the order book (Ask) is 96.8 USDT. What happens – some trader made a big sale of ETH, closed all orders up to 94 USDT, but there were no changes in the Order Book. Your Stop Loss is closed at the market price of 94 USDT because the minimum Bid price has been filled.

How is the working Ask price

Tracking the Ask price – the price will start to be determined by the first sell order in the Order Book. You bought 1 Ether at 100 USDT and placed Take Profit + 5%, that is, at the price level of 105 USDT. The Ether price began to grow and we can observe the following. The first order in the Order Book (Bid) is 102.25 USDT, and the first order in the Order Book (Ask) is 103 USDT. What happens – the price of the coin rises, there is an active buying. Your Take Profit is pending.

The price grows further for the second time … The first order in the Order Book (Bid) is 103.48 USDT, and the first order in the Order Book (Ask) is 104.24 USDT. What happens – the price of the coin rises, there is an active buying. Your Take Profit is also pending.

The price grows further for the third time … The first order in the Order Book (Bid) is 103.56 USDT, and the first order in the Order Book (Ask) is 107 USDT. What happens – some trader made a big buy of ETH, bought all orders up to the price of 107 USDT, but there were no changes in the Order Book. Your Take Profit is closed by the market at 103.56 USDT since the required Ask price has been reached.

Now let’s look at an example using Stop Loss with tracking the Ask price. You bought one Ether at the price of 100 USDT, and set the Stop Loss to -5%, at the price level of 95 USDT. The price of Ether began to fall and we see the following in the crypto market. The first order in the Order Book (Bid) is 98.47 USDT, and the first order in the Order Book (Ask) is 99 USDT. What happens – the price of the coin falls, there is an active selling. Your Stop Loss is pending.

The price falls further for the second time … The first order in the Order Book (Bid) is 94 USDT, and the first order in the Order Book (Ask) is 96.8 USDT. What happens – some trader made a big sale of ETH and closed all orders up to the 94 USDT price, but there were no changes in the Order Book. Your Stop Loss is pending.

The price falls further for the third time … The first order in the Order Book (Bid) is 94.87 USDT, and the first order in the Order Book (Ask) is 94.99 USDT. What happens – the price of the coin falls, there is an active selling. Your Stop Loss is closed on the market at 94.87 USDT because the minimum Ask price has been reached.

What the better use in crypto trading – Bid, Ask, or Last price?

From the foregoing regarding the mechanism of Ask and Bid, we can conclude that Ask is better suited for Stop Loss, and Bid is better for Take Profit. In principle, this is true, although sometimes there are exceptions. For example, you put Stop Loss on Ask. The price of the coin began to fall and approach the Stop Loss. A large sell starts, but since the Ask is still above the Stop Loss, when the Bid reaches it and goes even lower. Then the price of the crypto reverses and moves up.

With this variant of events, you are in luck, since you had an Ask and your Stop Loss did not work and the price went in the direction of profit you need. Now imagine that you always choose to Ask and Stop Loss -10%. The story with the fall of your coin repeats itself, but this time the crypto does not unfold but falls further. Upon completion of the first sale, the Bid price of the token has already become lower than the Stop Loss and is at the level of -12%.

The Ask price is at the level of -8% and Stop Loss is still not triggered. The price continues to fall, up to -19% for Bid and -13% for Ask. Your Stop Loss is triggered by the market and your loss is -19%. But if you chose the Bid pricing method, your loss would be 12%.

It turns out that there is no ideal choice between the Bid and Ask prices, since in the first and second cases there are advantages and disadvantages. In Bid, there is a possibility of being thrown out of the crypto market ahead of time, and in Ask to get big losses in Stop Loss. Therefore, you will have to choose based on your trading strategy, money management, risk and your preferences.

As for Take Profit, nowadays professional traders are advised to choose Bid price. The fact is that if another user creates a large purchase and the price for the order book goes up + 20%, then your trade will still be closed by the order book. And the profit at the moment may be only + 5%.

This video about Bid, Ask and Last prices have been completed. This is perhaps one of the longest videos and articles on botcryptotrade.com, as the material is really important and there is no need to separate it into parts. If you do not understand something, please watch this video one more time and read the text description for understand everything. See you in the new videos on our channel!