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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 with a market order, you pay the ask price.
  2. When you sell with a market order, 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

  • Market orders buy at the ask and sell at the bid; a limit order lets you set your own price
  • 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