BasicsInteractive

Spread

The gap between the bid and the ask — the built-in cost of entering a trade.

Also called: bid-ask spread · bid ask spread

In plain language

The spread is what you pay for immediacy. Buy at the ask, sell at the bid, and the difference is gone before the trade has done anything.

Highly liquid instruments have tight spreads — often a single cent on a large-cap stock. Thin instruments can have spreads of several percent, which quietly destroys short-term strategies.

Spreads widen when liquidity dries up: outside regular hours, around news, and in fast-moving markets. The same instrument can be cheap to trade at 11am and expensive at 4:01pm.

The formula

Spread

Ask − Bid

Spread %: (Ask − Bid) ÷ Ask × 100
Round-trip cost: Spread × Position Size

Change the numbers

This is the concept as a working tool. Edit any field and watch what moves — that relationship is the thing worth remembering.

Try it yourself

Bid

Ask

Spread: $0.0400
Spread %: 0.08%
Cost To Enter: $8.00

You buy at the ask and sell at the bid, so this $0.0400 gap is gone before the trade does anything. On a target of a few percent, that matters.

Seen on a chart

You sell at the bid and buy at the ask. The gap between them is paid on every round trip, before the trade has done anything.

Why it matters

The spread is a fixed tax on every round trip. If your average winner is 0.5% and the spread is 0.2%, nearly half your edge is gone before commissions.