Spread

Spread is the difference between the best available buy price (bid) and the best available sell price (ask) in a market.

The basic formula is:

Spread = Ask − Bid

For example, if the best bid is $59,990 and the best ask is $60,010, the absolute spread is $20.

What spread indicates

A small spread means the best buy and sell prices are close together. A large spread can occur in less liquid markets or during periods of increased uncertainty and rapid price movement.

For a trader, the spread is part of the effective cost of immediate execution. Buying at the ask and selling immediately at the bid in an otherwise unchanged market produces a negative result equal to the spread before fees.

Spread and liquidity

Spread is closely related to the condition of the order book. A market with many orders close to the current price can maintain a relatively small spread.