Education

How Bid-Ask Spread Affects Entry and Exit Costs

By Walid Mograbi · 2026-04-09 · 2 min read

The spread can act like a hidden cost even when no direct fee appears on the screen.

Why this lesson matters

The spread can act like a hidden cost even when no direct fee appears on the screen.

The core idea

• The bid-ask spread is the gap between the highest available buying price and the lowest available selling price at the same moment.
• When liquidity weakens or volatility rises, that gap usually widens and raises the implicit cost of entering and exiting a trade.
• The last traded price alone does not explain execution quality, because fills also depend on spread width and how fast the market is moving.

Practical example

Before sending a market order in a thin market, compare the bid and ask so you can judge the hidden entry cost first.

Common mistakes to avoid

• Trusting the last price without checking the spread
• Ignoring spread risk in thin markets
• Assuming execution cost stays fixed during fast moves

What to do next

It helps you read the screen more carefully and understand why execution may differ from the last visible price.

Important caution

A wide spread can damage a trade even when the direction looks clear, so do not treat it as a minor detail.

Further reading

• https://www.investor.gov/introduction-investing/investing-basics/glossary/bid-ask-spread
• https://www.investor.gov/introduction-investing/investing-basics/glossary/ask-price
• https://www.finra.org/investors/investing/investment-products/stocks/order-types