Bid/Ask Spread

Bid-ask spread are set by the market makers who usually act as mediators between a trader and the financial market. The spread, which is taken by getting the difference between the highest price that a buyer is willing to pay for an asset and the lowest price a seller is willing to accept, serves as a transaction cost. In this way, brokers earn as traders transact by buying and selling currencies and other asset classes. 

When traders buy at the ask price and sell at bid price, brokers or market makers buy at bid price and sell at ask price.

Liquidity of each asset plays a big role in the size of the bid-ask spread from one asset to another. The higher the liquidity of a market, the lower the spreads get. 

To understand bid-ask spread better, consider the following example. Say the bid price for a certain stock is worth $25 while the ask price is at $27, consequently, the bid-ask spread is $2. 

Risk disclaimer "Market Solutions Ltd – Suite 305 Griffith Corporate Centre P.O. Box 1510 Beachmont, Kingstown, St Vincent and the Grenadines is a financial services institution outside the European Union Area, which is subject to the supervision of the IFMRRC Certificate 0395 AA V0128 Trading in Forex/ CFDs and Other Derivatives is highly speculative and carries a high level of risk. It is possible to lose all your capital. 70% of trading deals can be unprofitable. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent advice if necessary. Speculate only with funds that you can afford to lose. This Website may contain information in particular regarding financial services and products that could be regarded b a E.U. supervisory authority as an offer of financial services targeted in Europe. ESMA intervention measures do not apply to customers of Market solutions Ltd and it is your responsibility to choose a company which is most suitable for your trading needs. By clicking continue you confirm that you have read, understood and agree to the risk disclosures, terms of service, cash policies, privacy policies and this notice and that you are visiting this website on your own initiative, without any encouragement whatsoever from Umarkets.com or Market Solutions limited." Cookies notification: “We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we assume that you are happy with it. Continue
×

Help with deposit?