Why is there a spread between bid and ask?
Click to see full answer
Herein, what does it mean when there is a large spread between bid and ask?
Large Spreads If the bid and ask prices on the EUR, the Euro-to-U.S. Dollar futures market, were at 1.3405 and 1.3410, the spread would be 5 ticks. A large spread exists when a market is not being actively traded and it has low volume—meaning, the number of contracts being traded is fewer than usual.
Additionally, why is the bid/ask spread a transaction cost? Although the spread is not a specific fee that traders are charged, it is a source of revenue to the market maker and part of the cost of trading to the investor. In short, the bid-ask spread, along with commissions or other fees, represents a basic transaction cost of trading in most financial markets today.
Simply so, how do I stop bid/ask spread?
The easiest way to avoid paying the bid-ask spread is to use limit orders. One extremely simple way to avoid slippage altogether is to set a limit order for a stock at the price you're willing to pay for it (or the price you're willing to sell it for), make it good until cancelled, and simply walk away.
Do you sell at the bid or ask?
The ask price is what sellers are willing to take for it. If you are selling a stock, you are going to get the bid price, if you are buying a stock you are going to get the ask price. The difference (or "spread") goes to the broker/specialist that handles the transaction.