Bid/Ask Spread Definition

Bid/Ask Spread Definition - The Bid/Ask spread is the difference between the price a Seller is asking for and the price that a Buyers is willing to pay. A Bid/Ask spread exists in virtually every freely traded market. In currencies for example, if you receive a quote for a EUR/USD currency pair of $1.2750/52, the first figure is the "Bid" price of $1.2750, the second figure is the "Ask" price, and the net of the two, $0.0002, is equivalent to a spread of 2 "pips" in forex slang. In a market that is moving quickly upward or downward, the Bid/Ask spread often widens. If the perceived value of a currency is considerably higher or lower than its current price the Bid/Ask spread may also widen. The Bid/Ask spread is the profit margin for the broker/dealer involved in the transaction. Commission spreads in forex are typically in the 2-5 pips range. Compare brokers for the best prevailing fee structures. Currency spreads for bank wire transfers are considerably higher due to a host of consumer pricing issues unrelated to retail forex trading.