Bid Ask Spread – What is a Bid/Ask Spread?

Definition of Bid/Ask Spread: The bid or ask spread is regarded as a difference between the cost that a seller asks for and the cost that the purchasers are willing to give. The difference in offer price and bid cost known as spread takes place in trading market everyday in a free manner. For example as far as currencies are concerned, if you attain a quote from either USD or EUR currency pair of about 1.2750/52 dollar, the initial number is the bid cost of about $1.2750. The figure followed by it is called as the Ask Price. When we add both the numbers we get about $0.0002, which is equal to the “spread”. In the market which is moving downward or upward in a quick manner, the spread is generally widened. If the apparent cost of money is higher or lower compared to the existing cost, the spread of Bid and ask may also be widened. The spread is regarded as the profit boundary for the dealer or broker who is engaged in the transaction. The commission spreads included in Forex trading is generally between the ranges of 2 to 5 pips. For finding the best fee structure, one should compare the brokers.