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Trading
Bid-Ask Spread
Difference between bid and ask; proxy for liquidity and trading cost
Definition
The bid-ask spread is the difference between the highest bid price and lowest ask price for a security. Narrow spreads indicate high liquidity, while wide spreads suggest low liquidity. The spread represents the transaction cost for trading and is profit for market makers.
Related Topics
#liquidity
#transaction cost
#market maker
#price discovery
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Category: Trading
Trading concepts cover market mechanics, order types, liquidity, and execution strategies.
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