Bid-ask spread

The bid-ask spread is the amount by which the asking price for an asset exceeds its bid price. This difference represents the price spread between what customers are willing to pay (the ask price) and the lowest price at which sellers are willing to sell (the bid price). Brokers earn a profit on this spread. For example, the bid price of a security is $20 and the ask price is $21, so the bid-ask spread is $1.

An asset that is highly liquid, such as a foreign currency, tends to have a very small bid-ask spread. Conversely, an illiquid asset, such as thinly traded shares, tend to have a much higher bid-ask spread, since there are few buyers and sellers.