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Bid-Ask Spread

Volume Price Analysis glossary · Validation Vs. Anomaly (Spread & Volume)

Definition

The difference between the ask and bid prices; the market maker's basic profit margin.

Bid-Ask Spread in plain English

Every moment there are two prices: the bid (the most a dealer will pay to buy from you) and the ask (the least they'll accept to sell to you). The bid-ask spread is simply the gap between them, and it's how the dealer earns a living — they buy a bit low and sell a bit high, pocketing the difference. It's exactly like a currency booth at the airport that buys dollars cheaper than it sells them; that small gap, repeated across thousands of trades, is their profit.

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