Bid-Ask Spread
The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security.
Explained Simply
The bid-ask spread is the cost of immediacy in trading. If a stock shows a bid of $50.00 and an ask of $50.05, the spread is $0.05. If you want to buy immediately, you pay the ask; if you want to sell immediately, you receive the bid. The spread represents an implicit transaction cost — every round trip (buy then sell) costs you at least the spread. Liquid stocks like Apple might have a $0.01 spread, while illiquid penny stocks can have spreads of $0.10 or more. Spreads widen during volatile markets, pre-market/after-hours sessions, and around news events. Market makers profit by capturing the spread — they buy at the bid and sell at the ask.
How Tradewink Uses Bid-Ask Spread
Tradewink's cost-aware PositionSizer models the bid-ask spread as part of transaction cost estimation. The system factors expected spread costs into position sizing so that the minimum expected profit exceeds total costs (spread + commission + slippage). The SmartExecutor uses limit orders placed near the midpoint of the spread to reduce execution costs rather than crossing the full spread with market orders.
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See Bid-Ask Spread in action
Tradewink uses bid-ask spread as part of its AI trading signal pipeline. Start getting signals that use this concept to find real opportunities.