Glossary · Markets & Trading Mechanics

Spread

The difference between bid and ask prices.

The spread is ask minus bid. Tight spreads usually mean a liquid market; wide spreads often mean thinner trading or higher transaction costs built into the quote.

Spreads matter more than many beginners realize because every round-trip (buy then sell) crosses the spread. On high-volume ETFs the cost may be a penny or less; on obscure stocks it can be much larger.

Example

If Bid is $10.00 and Ask is $10.05, the spread is $0.05. Buying at $10.05 and immediately selling at $10.00 would realize that $0.05 cost before any other fees.