Bid-Ask Spread

The 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) for a financial asset, like stocks or currencies. It reflects the liquidity and market activity for that asset; a narrower spread indicates a more liquid market with many buyers and sellers, while a wider spread suggests less liquidity. Essentially, it’s the transaction cost traders encounter when buying or selling, representing the market’s supply and demand dynamics at any given moment.