Bid-Ask Spread

What is a Bid-Ask Spread?

A bid-ask spread is the sum by which the ask value exceeds the bid price for an asset in the market. The bid-ask spread is basically the difference between the highest price that a buyer is willing to wage for an asset and the lowest price that a seller is willing to receive. An individual looking to sell will accept the bid price while one looking to buy will pay the ask value.

KEY TAKEAWAYS

  • The spread is the transaction price. Price takers buy at the ask price and sell at the bid price but the market creator buys at the bid price and sells at the ask price.
  • The bid represents demand and the ask signifies supply for an asset.
  • Bid-Ask Spread occupation involves a cost, as you are doing two trades instantaneously.
  • Bid-Ask Spread trades can be done in almost all kinds of safeties, but they are pretty popular in forex, interest rate profits and commodities.

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