How Does High Trading Volume Typically Affect the Bid-Ask Spread?
High trading volume generally leads to a narrower bid-ask spread. High volume indicates high liquidity and a large number of buyers and sellers actively participating.
This increased competition among market makers forces them to quote tighter spreads to secure trades. A narrower spread is beneficial for traders as it lowers the implicit transaction cost of executing a market order.
Glossar
High Trading Volume
Momentum ⎊ High trading volume in cryptocurrency derivatives, options, and financial derivatives signifies a surge in investor interest and activity, often reflecting heightened conviction regarding an asset's future price movement.
High Volume
Velocity ⎊ High volume, within cryptocurrency and derivatives markets, signifies a period of intensified transactional activity, often exceeding historical norms and indicating substantial participation.