Bid, Ask and Spread: How Prices Are Quoted and What They Cost
The bid is the highest price buyers are currently willing to pay; the ask, or offer, is the lowest price sellers are willing to accept. The spread is the difference between them. Every time you trade with a market order, you pay part of it.
Beginner · 8 min read · Updated
What you will learn
Read the best bid and ask, calculate the cost of crossing the spread and recognise when it widens.
Read first: Order Types Explained: Market, Limit, Stop and Stop-Limit Orders
Reading the quote
A quote shows two prices and, on most platforms, the size waiting at each. If the best bid is 18,402.50 with 11 contracts and the best ask 18,402.75 with 9 contracts, the spread is 0.25 point — one tick on Nasdaq-100 futures. The mid price, halfway between the two, is 18,402.625; no trade can happen there on a market whose minimum step is 0.25.
The last traded price shown on a chart is either a bid or an ask price: it tells you where the latest trade happened, not where you could trade next.
The spread is a cost
Buying at the ask and selling at the bid immediately afterwards loses the spread, even if the market has not moved. On a contract whose tick is worth $5, like the E-mini Nasdaq-100, a one-tick spread costs $5 per contract for a round trip made with market orders; on the Micro contract, whose tick is worth $0.50, it costs $0.50.
Hypothetical example · The spread over a month
A trader makes 10 round trips a day with 2 NQ contracts, entering and exiting with market orders, on a one-tick spread. The spread alone costs 10 × 2 × $5 = $100 a day, about $2,000 over 20 trading days, before commissions.
When the spread widens
- Quiet hours: fewer participants post limit orders, so the gap between bid and ask grows.
- Scheduled releases: liquidity providers often pull orders just before major data, then return.
- Fast markets: after a shock, the book can be thin for seconds or minutes.
On the most liquid index futures during active hours the spread is often a single tick, but you should check it on your own market and session rather than assume it.
Size at the bid and ask
The size shown at each level is how many contracts can trade there right now. If you send a market order larger than the size at the best ask, the rest fills at the next prices up: that is slippage. The depth of market shows several levels; the free TEVO DOM displays them for NinjaTrader 8.
The spread as a share of your target
The spread matters most when targets are small. Compare it with the target, not with the price of the contract.
Hypothetical example · A four-tick scalp
A trader aims for 4 ticks of profit and risks 4 ticks. Entering with a market order buys at the ask, one tick above the bid: if the market did not move at all, the position would already show a loss of one tick against the price at which it could be sold. That one tick is a quarter of the 4-tick target, paid before anything else happens.
On a swing trade aiming for 200 ticks, the same one-tick spread is half a percent of the target and hardly matters. The shorter the holding period, the more the spread and order type decide the result.
Common mistakes
- Reading the chart price as the price you will get.
- Ignoring the spread when calculating the cost of a strategy.
- Trading with market orders just before a release, when the spread is widest.
- Assuming the size in the book will stay; it can be cancelled before your order arrives.
Practice exercise
During three different hours of the day — the Asian session, the New York open and the last hour — note the spread and the size at the best bid and ask on the contract you trade. Then calculate what the spread would cost your usual number of round trips per day.
Check your understanding
1. Bid 18,402.50, ask 18,402.75 on NQ ($5 per tick). What does a market round trip cost in spread?
- $0.50
- $5
- $20
Show the answer
Answer: $5. The spread is one tick, worth $5 on NQ.
2. Why does the spread often widen before a major release?
- The exchange raises fees
- Liquidity providers pull their orders
- Market orders are forbidden
Show the answer
Answer: Liquidity providers pull their orders. Fewer resting orders mean a larger gap between bid and ask.
3. Where can a trade never happen on a market with a 0.25 step?
- At the bid
- At the ask
- At a mid price of 18,402.625
Show the answer
Answer: At a mid price of 18,402.625. Prices must be multiples of the minimum step.
Practise with the free tools
Frequently asked questions
Is the ask always higher than the bid?
Yes. If a buyer and a seller agree on a price, a trade happens and the orders leave the book.
Do limit orders avoid paying the spread?
A limit order that rests and is filled by someone else does not cross the spread, but it may not be filled at all.
Why do some markets have wider spreads?
Spreads reflect liquidity and volatility: fewer participants or larger price swings mean wider spreads.
Related lessons
References and further reading
- E-mini Nasdaq-100 futures contract specifications — CME Group
- Micro E-mini Nasdaq-100 futures contract specifications — CME Group
- SuperDOM (NinjaTrader 8 Help Guide) — NinjaTrader
- Types of Orders — Investor.gov (U.S. Securities and Exchange Commission)
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