Bid-Ask Spread

Bid-Ask Spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) in a market. It represents the transaction cost in trading and reflects the market's liquidity. A narrower spread indicates higher liquidity, meaning more buyers and sellers are active. Conversely, a wider spread suggests lower liquidity and higher transaction costs. Traders and investors often monitor the bid-ask spread to gauge market conditions and estimate the potential cost of entering or exiting a position.