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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask).
Why It Matters
The bid-ask spread is a hidden cost of trading. If a stock's bid is $99.95 and ask is $100.05, you lose $0.10 per share instantly when you buy and sell. Liquid stocks like Apple have penny-wide spreads; illiquid penny stocks can have spreads of 5-10%. The spread is how market makers profit, and it's why frequent trading erodes returns.
Key Points
- Tight spread (small gap) = liquid stock, easy to trade. Wide spread = illiquid, costly to trade
- Spreads widen during volatility, after-hours, and on low-volume stocks
- You can avoid the spread by using limit orders and waiting for your price
Learn More
Market Orders vs Limit Orders
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
The difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). The bid-ask spread is a hidden cost of trading. If a stock's bid is $99.
The bid-ask spread is a hidden cost of trading. If a stock's bid is $99.95 and ask is $100.05, you lose $0.10 per share instantly when you buy and sell. Liquid stocks like Apple have penny-wide spreads; illiquid penny stocks can have spreads of 5-10%. The spread is how market makers profit, and it's why frequent trading erodes returns.
Tight spread (small gap) = liquid stock, easy to trade. Wide spread = illiquid, costly to trade
Spreads widen during volatility, after-hours, and on low-volume stocks
You can avoid the spread by using limit orders and waiting for your price