Stock Market Glossary
Bid-ask spread
Bid-ask spread explained: what bid and ask quotes reveal about liquidity, trading costs and order types.
In brief: The bid-ask spread is the gap between the highest current buying price (bid) and the lowest current selling price (ask). It is a visible part of the cost of buying or selling a security immediately.
How it works
If you buy at the ask and immediately sell at the bid, the difference is roughly the spread. Tight spreads often indicate liquid markets with many active buyers and sellers. Spreads can widen for thinly traded instruments, outside core trading hours or during market stress.
Practical example
If an ETF shows a bid of EUR 100.00 and an ask of EUR 100.20, the spread is EUR 0.20, or 0.2 percent. A market order can execute at the visible ask. A limit order lets you define the maximum purchase price or minimum sale price instead.
What investors should keep in mind
Compare spreads during liquid trading hours and alongside the broker fee. For small caps, bonds, certificates and crypto assets, the spread can be a material part of total trading costs.
Source and further reading
Frankfurt Stock Exchange: realtime bid, ask and spread quotes
