Bid-Ask Spread

The difference between the highest price a buyer is willing to pay for a stock and the lowest price a seller is willing to sell a stock.  Securities with high liquidity (such as currencies) usually have a smaller, or tighter, bid-ask spread. This is even evident within the foreign currency exchange market, with the Euro/US Dollar having bid-ask spreads of two or three hundredths of a penny while more obscure currency pairs may have bid-as spreads five times or more of that. A smaller bid-ask spread lowers trading costs for traders. The bid-ask spread is something a trader should have in mind, especially if he trades often.

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