Spread

The spread is one of the most common and most important terms used when discussing trading terminology. The spread is the difference between the sell (bid) and the buy (offer) prices of a financial instrument like currency pairs, indices, equities, and commodities.

The spread for financial instruments can be impacted by a range of factors, including:

[liquidity] - meaning how much demand there is for an asset and how easily it can be bought or sold. As the liquidity of an asset increases, the spread for a product usually diminishes.
[volume] - meaning the quantity of an asset that is traded. Products that have high trading volumes tend to have tighter spreads.
[volatility] - is a representation of how much a market price changes in a set period. When markets are very volatile, prices can change very quickly and spreads could increase.

Key takeaways:

The spread is the difference between the sell (bid) and the buy (offer) prices.
When markets are very volatile, prices can change very quickly and spreads could increase.
As the liquidity of an asset increases, the spread for a product usually reduces.

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