Module 1 — Foundations
Bid, ask and the spread
5 minute read
In plain English
The bid is the highest price someone will pay. The ask is the lowest price someone will accept. The gap between them is the spread.
Why it matters
The spread is a real cost. You usually buy at the ask and sell at the bid, so you start every trade slightly behind.
Example
Bid $2.40, ask $2.46. Buying 500 shares and immediately selling costs you $30 before commission.
Try this
Open any ticker page and note the spread as a percentage of price. Compare a high-volume name with a thin one.
Common mistake
Ignoring the spread on low-volume stocks, where it can be several percent.
What this does not mean
A narrow spread does not make a trade good. It just makes it cheaper to enter and exit.
Educational content only. Not financial advice.