Bid ask Spread
Bid ask spread is the difference between ask and bid. Wider spreads usually mean higher execution cost.
Definition
Bid ask spread is the difference between ask and bid. It is a direct indicator of friction at the top of the order book.
Why it matters
Wide spreads make small edges fragile. They also increase the gap between market price references and the price you actually pay.
How it connects
• Spread interacts with slippage when depth is low.
• Spread contributes to execution cost measured by effective spread.
Common pitfalls
Thinking tight spread means deep market: Depth can still be low.
Ignoring spread when computing break even: Spread raises practical break even thresholds.