What Is Bid-Ask Spread?
The bid is the highest standing buy order in the market; the ask (or offer) is the lowest standing sell order. The bid-ask spread is the gap between them — it represents the immediate round-trip cost of buying then selling an asset.
Spreads are tight on liquid instruments (a penny or two on mega-cap US stocks during regular hours) and wide on illiquid ones (sometimes several percent on small-cap stocks or thinly traded crypto pairs).
The spread is a real cost that's often overlooked. A trader who buys at the ask and sells at the bid pays the full spread regardless of price movement. For high-frequency or scalping strategies, spread can be the dominant cost. For position trading, it matters less but still affects expectancy. Always check the spread before trading, especially on instruments you don't know well — wide spreads are a warning sign.
Related terms
- Liquidity — The ease with which an asset can be bought or sold without significantly affecting its price.
- Slippage — The difference between the expected fill price of an order and the actual execution price.
- Market Order — An order to buy or sell immediately at the best available price — guarantees execution, not price.