Yatırımcı.AI

Spread (bid-ask spread)

The spread is the difference between the best bid and the best ask price for an asset and the invisible part of transaction cost. The bid-ask spread shows the cost of buying and selling instantly: the buyer pays the ask, the seller receives the bid, and the gap is the profit of the market maker or liquidity provider.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • In liquid stocks the spread is one tick wide; in thin stocks and warrants it is wide.
  • A narrow spread signals high liquidity, a wide one uncertainty or low interest; spreads widen around news and at the open.
  • a market order pays the spread immediately; waiting inside the spread with a limit order lowers cost.

Formula / calculation

Spread (TL) = Ask − Bid; Spread (%) = (Ask − Bid) / Mid price × 100. For example 45.50 bid / 45.52 ask: spread 0.02 TL, about 0.04%. The round-trip cost of a buy and sell is spread plus commission.

Interpretation

A narrow spread signals high liquidity, a wide one uncertainty or low interest; spreads widen around news and at the open. For frequent traders the spread can cost more than commission.

Pitfalls

a market order pays the spread immediately; waiting inside the spread with a limit order lowers cost. Bank spreads on FX and gold are very wide (1–3%). On crypto exchanges spreads can blow out suddenly in illiquid pairs.

Pages where this term appears

Related terms

Frequently asked questions

The spread is the difference between the best bid and the best ask price for an asset and the invisible part of transaction cost.

Spread (TL) = Ask − Bid; Spread (%) = (Ask − Bid) / Mid price × 100. For example 45.50 bid / 45.52 ask: spread 0.02 TL, about 0.04%. The round-trip cost of a buy and sell is spread plus commission.

Yatırımcı.AI ResearchMethodology