Trading Basics
Bid, Ask, and the Spread
The bid-ask spread is the hidden cost in every trade — understand it to protect your edge.
Key rules
- Buy at the ask, sell at the bid — you pay the spread to enter
- Tight spreads in liquid instruments, wide in illiquid ones
- The spread is a direct transaction cost on every trade
- Factor spread into your minimum R:R requirement
- Avoid illiquid assets with abnormally wide spreads
The bid is the highest price a buyer will pay; the ask is the lowest price a seller will accept. The difference is the spread — an immediate cost the moment you enter. You buy at the ask and sell at the bid, starting every trade slightly below breakeven.
In liquid markets (major forex, large-cap stocks), spreads are tight. In illiquid assets, spreads can materially affect profitability on short-term trades.