Orders and trading · updated October 21, 2026
What is the bid-ask spread and how much does it cost you
The spread is the gap between the best price buyers are offering (the bid) and the lowest price sellers are asking (the ask). It is a hidden cost: if you buy and sell right away, you lose exactly the spread, even if the price has not moved.
The bid-ask spread formula
- Bid
- The highest price someone is willing to pay right now. You can sell instantly at this price.
- Ask
- The lowest price someone is willing to sell at right now. You can buy instantly at this price.
Worked example
A stock has a bid of $19.90 and an ask of $20.10.
If you bought $1,000 worth and sold right away, you would be left with about $990, before any fee.
How to read the bid-ask spread
0.01-0.02%. For many small stocks on smaller exchanges, it can be 1-3%. The spread widens at the open, at the close and outside regular hours.
When the bid-ask spread can fool you
"Zero-commission" brokers: some make money on the spread, giving you a slightly worse price. Frequent trading: if you go in and out often, the spread costs you more than the commission. Small ETFs: an ETF with few assets can have a wide spread even when its index is very liquid.
Related terms
Learn it in the Academy
Questions about the bid-ask spread
Why is the buying price different from the selling price?
Because on an exchange there are always buyers offering a bit less and sellers asking a bit more. The gap between the best of them is the spread.
How do I cut the cost of the spread?
Trade liquid stocks and ETFs, during regular hours (not in the first and last minutes), and use limit orders near the middle of the spread.
These explanations are for information only. They are not a recommendation to buy or sell.
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