What is spread?

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The spread in trading (also known as the 'bid-ask spread,' 'bid-offer,' or 'buy-sell spread') refers to the difference between the prices for an immediate purchase (ask) and immediate sale (bid) of an asset quoted either in an order book or by a market maker or another provider. A trading asset could be a stock, futures contract, forex pair, etc.


For example, if the ask price for a stock is £12 and the bid price for the same stock is £10.50, the spread for the stock is £1.50.

The size of the spread is one of the features used to distinguish market liquidity. Some markets have more liquidity than others. The currency market, for instance, is generally considered to be the most liquid in the financial world.

Therefore for a major currency pair like EUR/USD, the spread will be very small.

On the other hand, small-cap stocks and other less-liquid assets are likely to have a wider proportional spread.

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