Bid-Ask Spread
The gap between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). Crossing it is the minimum cost of an immediate trade.
The bid-ask spread is the difference between the best bid (highest buy order in the book) and the best ask (lowest sell order). A market buy fills at the ask; a market sell fills at the bid — so a round trip immediately costs the spread.
Spread width reflects liquidity: heavily traded large-caps may trade at $0.01 wide; illiquid small-caps or off-hours sessions can show spreads of 1–5%. The spread is a guaranteed cost paid to market makers for providing instant liquidity.
Limit orders that rest at or inside the current spread improve the market and earn maker status; market orders that cross the spread are takers.
Example
Best bid: $49.98, best ask: $50.02. Spread = $0.04. Buying at market costs $50.02; selling at market yields $49.98 — a $0.04 round-trip cost per share before commissions.
Related Terms
Level 2 Data
The full order book showing all visible bids and asks beyond the best inside quote, including size at each price level.
IntermediateMaker
A trader whose limit order rests in the order book, adding liquidity and typically earning a fee rebate on maker-taker exchanges.
IntermediateMaker-Taker Fees
A two-sided fee model where liquidity providers (makers) earn rebates and liquidity takers pay fees.
AdvancedMarket Order
An order to buy or sell immediately at the best available price. Guarantees execution but not the fill price.
BeginnerMarketable Limit Order
A limit order priced at or through the current best opposite quote — it acts like a market order but protects against extreme fills.
IntermediateNBBO
The highest bid and lowest ask for a stock across all U.S. exchanges combined — the consolidated quote your broker must benchmark fills against.
IntermediateOrder Book
The real-time record of all outstanding buy and sell limit orders for an asset, organized by price level.
BeginnerOrder Types
The instructions that tell a broker how to execute a trade — chiefly market, limit, and stop orders, plus their conditions and time-in-force.
BeginnerPrice Improvement
A fill at a better price than the prevailing NBBO — buying below the national ask or selling above the national bid.
IntermediateSlippage
The difference between the expected fill price and the actual fill price. Positive slippage benefits you; negative slippage costs you.
BeginnerTaker
A trader whose order immediately executes against a resting limit, removing liquidity from the book and typically paying a fee.
Intermediate