Order Books: The Real Price
When someone says "Bitcoin is $97,000" — that's not really a price. It's the last price someone paid. The price YOU will pay depends on the order book.
Market Orders vs Limit Orders
Buy now at whatever price. Eats into the order book from the best price. If you buy 2 BTC — average price ~$97,037. That's slippage.
You set your price. Your order sits in the book and waits. No slippage, but no guarantee of execution.
Order Book Depth
$10K buy barely moves the price
$500 buy moves price up 4.5%
For arbitrage this is critical: a 10% spread on a thin token doesn't mean 10% profit. If there's only $50 at the best price, your order eats through multiple levels.
Reading books by depth before a trade is covered in the order books guide.
Fees: Death by a Thousand Cuts
0.05-0.20% per side
Maker: 0.02-0.10%. Taker: 0.05-0.20%
Flat or variable per transfer
Separate from exchange fee
Every 8h for perpetual futures
Why a spread is not yet profit is covered in the slippage guide.
For arbitrage this is critical: a 10% spread on a thin token doesn't mean 10% profit. If there's only $50 at the best price, your order eats through multiple levels.
On a $15 gas day — net drops to $12.50. With only 1.5% spread — just $0.50.
Internal exchange spread, deposit fees, conversion fees. Even 0.10% vs 0.05% difference on both sides = 0.10% total. On a $5K trade at 2% spread — $5 saved. Over hundreds of trades, it adds up.
Liquidity: The Make-or-Break Factor
Liquidity = how easily you can buy or sell without significantly moving the price. This is the single most important concept for arbitrage traders.
A 15% spread with no liquidity is worthless. A 2% spread with deep order books is money.
Rough indicator, can be inflated. Tells about the past, not current book.
The real measure. $50K within 1% = comfortable for $5-10K trade.
< 0.05% = active market makers. > 2% = low liquidity, careful.
$500K volume in 10 trades ≠ $500K in 5,000 trades. More trades = more active market.
CEX vs DEX
Order book model. You deposit funds, the exchange holds them, matching on their servers. Fast execution (milliseconds).
Fast execution, clear pricing, multiple order types
Withdrawal delays, D/W suspensions, KYC, exchange risk
Most use AMM — a liquidity pool instead of an order book. Price determined by the ratio of tokens in the pool.
No KYC, no withdrawal delays, transparent liquidity
Gas fees, slower execution, MEV risk (front-running), AMM slippage
CEX and DEX markets are partially disconnected. Different user bases, different liquidity providers, different speeds. When a token pumps on CEX, the DEX price lags. This creates consistent arbitrage opportunities.
Putting It All Together
Every trade you make is governed by these three factors:
Determines your actual execution price (not the displayed price)
Take their cut from every transaction
Determines whether the opportunity is real or a mirage
The traders who consistently make money aren't the ones who find the biggest spreads. They're the ones who understand the full cost structure and only trade when the math works after everything is accounted for.
Where to go next: the order books guide shows how to read depth before a trade, and the slippage guide explains why a spread is not yet profit. Next up: how to trade each arbitrage type and which venues fit spot, futures, and funding arb.
FAQ
Why does the actual fill price differ from the displayed price?
The displayed price is the top quote, while a market order eats through multiple book levels. The article example: buying 2 BTC averages ~$97,037 instead of $97,030 — that is slippage.
Which fees should you count in an arbitrage trade?
Trading fees on both sides, withdrawal fee, network gas, and funding for perpetuals. In the article example, $30 gross on a $1,000 trade becomes $25.50 net after fees.
How do you quickly assess an exchange's liquidity?
Check depth within 1% (the real measure), bid-ask spread (under 0.05% means active market makers), and trade frequency — not just 24h volume, which can be inflated.
How do DEXes differ from CEXes for arbitrage?
CEXes run order books with fast execution but KYC, withdrawal delays, and D/W suspensions. Most DEXes use AMM pools: no KYC or withdrawal delays, but gas, MEV risk, and AMM slippage.