What is Spread?

The spread is the gap between the best price a buyer will pay and the best price a seller will accept on a venue: the bid and the ask. It is the cost of trading immediately, paid on top of any fee, because a market buy fills at the ask and a market sell at the bid. Tight spreads mean a liquid market with many competing orders; wide spreads mean thin books, low volume or a nervous market.

Spreads are quoted in price or in basis points and they change constantly. Major pairs on large exchanges trade with spreads of a few cents; small tokens on thin venues can carry spreads of several percent, which means a round trip loses that much before the price has moved at all. Volatility widens spreads because market makers pull their orders when risk rises.

On automated market makers the equivalent cost appears as slippage rather than as a quoted spread. There are no resting orders, so the pool moves its own price against the trade, and the larger the trade relative to the pool, the worse the effective spread. The mechanics differ; the lesson is the same: every trade has a hidden cost beyond the fee.

For a portfolio the spread matters at valuation and at exit. Marking a position at the mid price is standard, but a large holding of a thin token will be sold at the bid, not the mid, and the difference is a real loss waiting to be realised. Trackers price at mid because it is the honest neutral number; the exit cost is yours to keep in mind.

The practical habits are simple. Prefer limit orders on thin markets, look at the book before sizing a trade, and be suspicious of any price that sits far from where the last real trade printed. A price without a spread is a screenshot, not a market.