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Every market has two prices:
  • The bid is the highest price buyers are willing to pay
  • The ask is the lowest price sellers are willing to accept
The spread is the gap between these two prices. A wider gap means you may pay more when buying or receive less when selling.

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How It Works

  1. When you buy, you pay the ask price.
  2. When you sell, you receive the bid price.
  3. The difference between them is the spread.
  4. Tighter spreads mean better execution.
  5. Wider spreads mean higher trading cost.
Tight spread: A tight spread means the bid and ask are close together, common in more liquid markets. Wide spread: A wide spread means the bid and ask are far apart, common in less liquid markets.

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Key Points

  • You buy at the ask and sell at the bid
  • The spread is the gap between these two prices
  • Wider spreads increase your trading cost
  • More liquid markets usually have tighter spreads
  • Your execution price depends on the bid, the ask, and the available size