Imagine you have purchased your wallet, obtain your first cryptocurrency and you are keen to get trading. The first thing you will notice is that you’re currently holding cryptocurrency at a value that is less than the trading price. This is because you have acquired the crypto at a buy price which is the amount for which an exchange is willing to sell currency to you.
This guide explains the three types of pricing that a crypto exchange uses and shows you how to track each of those prices as accurately as possible.
Buy Prices
Tracking accurate buy prices is difficult due to a couple of reasons. First, it will depend on which exchange you’re using as the amount they will want as the buy price differs. You will notice the buy price is higher than the sell price, this is to dissuade people from buying crypto and flipping it immediately for profit.
Each platform will have buy prices that fit the trading activity on it. For example, if they notice a lot of short trades on a currency, they’re likely to increase the buy price to protect the exchange from risk.
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This is the reason why cryptos with low volatility tend to have buy prices closer to their value.
The best way to check buy prices is to compare exchanges as tedious as that sounds. And then, you must consider the fees to make sure the chosen exchange is still competitive.
Sell Prices
These are the easiest prices to get accurately as there are plenty of online tools, charts, and calculators to assist with currency conversion. Sell prices will be lower than the buy prices because the exchange wants to ensure there is a buyer for this crypto somewhere.
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Exchanges make their money by keeping the flow of money going. So, it is in their interests to ensure they set a competitive sell price.
If you’re converting crypto (trading from one crypto to another) you should use charts like an ETH to BTC chart to get the correct conversion in real-time. Charts and calculators are a fantastic tool for traders because they enable investors to see where they can make a profit in a very clear and easy to follow way.
Actual Value
The actual value of the cryptocurrency is in the middle of the buy and sell values. The buy value will typically be higher and the sell value will typically be lower than the actual value.
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In extremely rare circumstances, where mistakes have been made, this might not be the case.
Even though traders are not really able to buy or sell currencies at the actual value, it is important. It shows traders how much they need to make on their investment before they can sell for profit. For example, if a trader buys at $2 a token that is valued at $1, they know they need the actual value to increase by at least $1 to break even on their trade.
Most crypto exchanges will only track actual values on their graphs and display the buy and sell price to one side. If you’re looking at projections or historic data, this will be the actual value data rather than buy or sell prices. Actual values are tracked closely by the majority of exchanges and you won’t find too much discrepancy here.
The biggest difficulty is to make sure you’re getting a good buy and sell price. However, using calculators, charts, and a little legwork will help you significantly.