Investing term
What is Spread?
The gap between the best bid and the best ask.
The spread is the gap between the highest price a buyer will pay (the bid) and the lowest a seller will accept (the ask). It's a hidden cost of trading: buy at the ask and immediately sell at the bid, and you've lost the spread — before any price movement or commission.
Its size is a direct read on liquidity. For big, heavily traded stocks the spread is a cent or two, effectively negligible. For thinly traded securities it can be wide — a meaningful percentage of the price — which is why illiquid assets are quietly expensive to trade even when they charge no obvious fee. The spread is compensation for the market makers who stand ready to buy and sell, and it's the cost you pay for instant execution.
The spread is the gap between bid and ask. Buy at the ask and sell at the bid and you've lost it — a cent or two on liquid stocks, but a real slice of the price on thin ones.
For example
A bid of $19.95 and ask of $20.05 is a 10-cent spread — the instant cost baked into buying and selling that you never see as a fee.
Learn it by doing
That's Spread in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 5, How Markets Work Globally).
Try the free lesson →Why it matters to you
The spread matters because it's a cost most investors never notice — there's no line item, yet you pay it on every round trip. On liquid holdings it's trivial and not worth a thought; on illiquid ones it can quietly rival or exceed commissions, making frequent trading of thin securities a slow leak. Checking the spread before trading something obscure, and favouring liquid, tight-spread investments, is a simple way to stop paying more than you realise.
⚠ Overlooking the spread on thin securities
Because the spread isn't charged as a fee, it's easy to ignore — but on a thinly traded stock or fund it can be a wide slice of the price, paid every time you trade. Frequent trading of illiquid securities bleeds money through the spread with no obvious cause. Favour liquid holdings, and don't churn things with wide spreads.