What Is a Bid-Ask Spread?
A bid-ask spread is the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. It represents the cost of trading in financial markets, as buyers must pay more than sellers receive when they trade. The size of this spread can vary depending on market conditions, liquidity, and other factors.
The bid-ask spread also affects how much profit traders can make from their trades. If there is a large gap between what buyers are willing to pay and what sellers are asking for, then it may be difficult for traders to turn a profit due to high transaction costs associated with buying or selling at such prices. On the other hand, if there is only a small gap between bids and asks then it may be easier for traders to make money by taking advantage of small differences in prices over time.