Spread
The spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask).
Quick Reference:
Ask – Bid = Spread. Tight = liquid. Wide = Illiquid.
Expanded Explanation:
The spread shows the gap between buyers and sellers. In highly traded stocks, the spread is usually very small, someitmes just one cent. In less liquid stocks, the spread can be large, meaning buyers and sellers are far apart. This gap acts as a hidden cost for traders, because to buy immediately you must accept the ask, and to sell immediately you must accept the bid.
Beginners should pay attention to spreads, especially in smaller or less liquid companies. A wide spread can eat into returns if you trade frequently.