The bid and the ask are the best prices on each side of the order book. A market buy pays the ask and a market sell receives the bid, so buying and selling again straight away loses the spread. Liquid pairs such as BTC and ETH perpetuals often have a spread of a single tick; small caps and quiet hours can have spreads of 0.1% or more.
Example
A token shows a bid of $0.995 and an ask of $1.005, a spread of $0.01, or about 1% of the price. Buying $5,000 with a market order and selling at once at the bid would lose about $50 to the spread alone, before fees. On BTC at $60,000 with a $0.10 spread, the same $5,000 round trip loses less than one cent.
Why it matters
The spread is part of the cost of every taker trade, and it decides which markets suit short-term strategies: a scalper aiming for 0.3% per trade cannot afford a 0.2% spread. A widening spread is also a warning sign that liquidity is thinning.
Common mistake
Judging a trade's cost by the exchange fee alone. On illiquid coins, the spread and slippage are often bigger than the fee. Check the spread before trading anything outside the majors.
FAQ
- How do I calculate the spread as a percentage?
- (Ask − bid) ÷ midpoint × 100. A $0.01 spread on a $1 token is 1%.
- Why does the spread widen?
- Market makers pull or widen their quotes when volatility rises or volume drops, for example around news, at weekends or in a market's quiet hours.
- Do limit orders avoid the spread?
- A limit order resting at the bid or ask avoids paying it, and can even earn it if both sides fill. But it may not fill at all.