What is Spread?
The spread is the difference between the bid price (what buyers are willing to pay) and the ask price (what sellers are asking) for an asset.
In trading, the spread is the gap between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask). This difference represents an implicit transaction cost for traders, as buying and immediately selling an asset would result in a loss equal to the spread.
The size of the spread is a key indicator of an asset's liquidity. Highly liquid assets traded in large volumes on major exchanges like the NYSE or Nasdaq, such as shares of Apple or Microsoft, typically have very narrow spreads. Less liquid assets, like some small-cap stocks or certain bonds, have wider spreads, making trading more expensive.