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Delta-X Academy

The Bid-Ask Spread

Original Delta-X illustration.
free7 min read

The bid is the highest price buyers are currently willing to pay; the ask, or offer, is the lowest price sellers will accept. The spread is the gap between them. It is the price of immediacy: the cost you pay to cross from one side to the other with a market order.

Target audience: Traders who never look at the bid and ask and only watch the last traded price.

Learning objectives

  • ✓Define the bid, the ask, and the spread between them.
  • ✓Explain why crossing the spread is a real cost.
  • ✓Identify what makes a spread widen.
  • ✓Account for spread cost in short-timeframe trading.

Definition

The bid is the highest price buyers are currently willing to pay; the ask, or offer, is the lowest price sellers will accept. The spread is the gap between them. It is the price of immediacy: the cost you pay to cross from one side to the other with a market order.

Why it matters

The spread is the most constant cost in trading and the one most often ignored because it hides inside the fill. Every market order pays it, and on short timeframes it can dwarf commissions. Understanding the spread as a real, recurring cost, and knowing what makes it widen, is the difference between a strategy that survives its own friction and one that is quietly bled dry by it.

Two prices, not one

There is no single price in a live market; there are always two. The bid is what you can sell to immediately, the ask is what you can buy from immediately, and the last traded price you see on the chart sits somewhere between them. To buy now you pay the ask; to sell now you receive the bid. The spread is the difference, and it exists because the participants posting those prices, the market makers and resting limit orders, demand compensation for providing instant liquidity.

The cost of crossing

Every time you use a market order you cross the spread, paying the ask to buy or accepting the bid to sell. Buy at the ask and sell at the bid and you have paid the full spread on the round trip even if price never moved. This is not a fee on your statement; it is baked into your fills, which is exactly why it is so easy to ignore. On a daily-timeframe swing it is negligible, but on a one-minute scalp it can be a large fraction of the move you are trying to capture.

What widens a spread

Spreads are tight in liquid, busy markets and wide in illiquid or stressed ones. They widen when volume thins out, such as overnight, around holidays, or in the moments around a news release when market makers pull their quotes to avoid being run over. They are wider on small, rarely traded instruments than on major ones. A spread that is two ticks at midday can blow out to many ticks in the seconds after a release, which is one reason market-ordering into news is expensive.

Worked examples

Example 1: The spread around a news release

A liquid market shows a one-tick spread all morning. Thirty seconds before a scheduled release, market makers widen their quotes and the spread balloons to eight ticks as they protect themselves from the coming volatility. A trader who market-buys in that window pays the full inflated spread on entry and, if they panic out moments later, again on exit. The same trade taken with patience after the spread normalised would have cost a fraction. The spread is not fixed; it is a live signal of how dangerous immediacy is right now.

Common mistakes

Watching only the last price and ignoring the live bid and ask.

Treating the spread as free because it is not a line-item fee.

Market-ordering into news when the spread has blown out.

Scalping a wide-spread instrument where the spread eats the edge.

Forgetting the spread is paid on both entry and exit.

Myth vs reality

Myth

That there is one price in the market rather than a bid and an ask.

Reality

No paired reality note provided.

Myth

That the spread does not matter because it is small at midday.

Reality

No paired reality note provided.

Myth

That the spread stays constant through the session.

Reality

No paired reality note provided.

Risk considerations

  • Wide spreads around news and off-hours make immediacy expensive.
  • On short timeframes the spread can exceed the edge of the strategy.

Practice exercises

1. Watch the spread change

Observe how the spread on your instrument behaves across different conditions.

  1. Note the spread during the busiest part of the session.
  2. Check it again in a quiet period such as overnight or a holiday.
  3. Watch what it does in the moments around a scheduled news release.
  4. Estimate the round-trip spread cost for your typical trade in each case.

Quiz

Q1. What are the bid and the ask?

Q2. Why is the spread an easily ignored cost?

Q3. What makes a spread widen?

Next lesson

Slippage: Why Fills Differ From Your Price

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This lesson is educational content only and is not financial advice. Order types, fees, and execution behaviour vary by broker, venue, and market; always read your own platform's documentation. Trading involves substantial risk, and good execution cannot turn a losing strategy into a winning one. Trade only with risk you can afford to lose.