Bid-Ask Spread

Detailed explanation

The bid is what you can sell at right now; the ask is what you must pay to buy right now. The difference is an immediate, invisible cost of trading. Liquid scrips have spreads of a paisa or two, illiquid ones can be several percent wide.

Formula

Spread % = (Ask − Bid) / Ask × 100

Example

Bid ₹99.50, ask ₹100.00: the spread is ₹0.50, or 0.5% — paid the moment you round-trip the trade.

Why it matters

For frequent traders the spread often costs more over a year than brokerage does.

Key points

• Widens in volatile or thinly traded markets.
• Limit orders avoid crossing the spread; market orders pay it.
• Check the spread before trading small-cap stocks or niche ETFs.

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