Bid-Ask Spread Explained: What It Costs You

The bid is the highest price a buyer is willing to pay; the ask (or offer) is the lowest price a seller will accept. The gap between them is the spread, and it’s a cost you pay on every trade.

How the spread works

If EUR/USD is quoted at 1.0850 / 1.0851, you can sell at the bid (1.0850) or buy at the ask (1.0851). The spread is 0.0001, or 1 pip. If you bought and immediately sold, you’d lose that pip: every trade starts slightly negative by the size of the spread.

Spread = Ask − Bid
Spread % = (Ask − Bid) ÷ Ask × 100

Stock example: bid $49.98, ask $50.02. The spread is $0.04, or 0.08%. On 100 shares, that’s $4 of cost on a round trip.

What affects the spread

Liquidity: heavily traded markets (major forex pairs, large-cap stocks, big index futures) have tight spreads. Thinly traded ones have wide spreads.
Volatility and news: spreads often widen just before and after big announcements such as CPI or jobs data.
Time of day: spreads in forex tend to widen during quiet hours and around the daily rollover, and are tightest when major sessions overlap. See forex market hours.
Your broker: some brokers offer raw spreads plus a commission; others build their fee into a wider spread.

Why it matters

For short-term trading, the spread can be a large share of the expected profit. A 1-pip spread on a 5-pip target is 20% of the move. That’s why scalpers care so much about spreads, and why longer-term traders worry about them less.

Charts and the spread

Most charts, including TradingView’s, plot one price series (often the bid or the last traded price), so your buy orders may fill a little higher than the chart line suggests. Where the data feed provides them, TradingView can show bid and ask lines in the chart settings.

Educational explanation only. ChartWatch is independent and doesn’t give trading or investment advice. Trading carries a risk of loss.

FAQ

What is the bid-ask spread?

The difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). It's an implicit cost on every trade.

How do you calculate the spread?

Subtract the bid from the ask. For a percentage, divide the result by the ask and multiply by 100.

Why does the spread widen?

Spreads widen when liquidity is low or uncertainty is high, such as around major news, at market open and close, or during quiet overnight hours.

Do you buy at the bid or the ask?

You buy at the ask and sell at the bid.

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