- What are bids and asks?
In the context of trading on the Stellar network, bids and asks refer to the buy and sell orders placed in an order book for a given asset pair.
A bid is a buy order that specifies the maximum price that a buyer is willing to pay for a specific amount of the base asset. Bids are usually placed below the current market price and represent demand for the base asset.
An ask is a sell order that specifies the minimum price that a seller is willing to accept for a specific amount of the base asset. Asks are usually placed above the current market price and represent the supply of the base asset.
When a bid and an ask match at a given price, a trade occurs, and the buyer and seller exchange the base and counter assets at the agreed-upon price. The price of the trade is determined by the price at which the bid and ask meet.
For example, let's say the XLM/USD order book has a bid for 100 XLM at $0.30 and an ask for 50 XLM at $0.31. If a buyer places an order to buy 50 XLM at $0.31, the order will be filled immediately, and the buyer will receive 50 XLM for $0.31 each. The remaining 50 XLM from the bid will remain in the order book until another buyer places an order to buy them at the same or a higher price.
Bids and asks can be viewed and traded using various tools and interfaces, including the Stellar DEX website and third-party trading platforms.
- What is the base asset and the counter asset?
In the context of trading on the Stellar network, the base asset and the counter asset refer to the two assets being traded against each other in a given order book.
The base asset is the asset that is being bought or sold, and the counter asset is the asset that is being used to buy or sell the base asset.
For example, in the XLM/USD order book, XLM is the base asset and USD is the counter asset. This means that if you want to buy XLM using USD, you would place an order in the XLM/USD order book where XLM is the asset you want to buy (base asset) and USD is the asset you want to use to buy it (counter asset).
When you place a buy order in an order book, you are effectively placing a bid to buy the base asset at a specific price, and when you place a sell order, you are effectively placing an ask to sell the base asset at a specific price. The bids and asks are matched by the Stellar network, and the trades are executed based on the best available price at the time of the trade.
It's worth noting that the base asset and the counter asset can be any two assets on the Stellar network, and the order book can be viewed and traded using various tools and interfaces, including the Stellar DEX website and third-party trading platforms.
Bid/Ask explanation from my own research on Stellar: Using example pair XLM/USDC Ask - the price I will pay in USDC to purchse 1 XLM (I am buying XLM, others are selling it to me) Bid - the amount of USDC I will receive for selling 1 XLM (I am selling XML, others are buying it from me)
Most of the time Bid < Ask.