Every trade needs a buyer and a seller to agree
Every trade requires both a buyer AND a seller agreeing on a price. No agreement, no trade.
Bid, ask, and spread defined
| Term | Definition | Example |
|---|---|---|
| Bid | Highest price a buyer will pay | $49.95 |
| Ask | Lowest price a seller will accept | $50.05 |
| Spread | Difference between bid and ask | $0.10 |
Why wide spreads cost you money
Large companies like Apple have penny-wide spreads. Smaller companies can have spreads of $0.50 or more, which means buying and immediately selling costs you money.
Compare bid-ask spreads across companies
In the Ticker view, look at the bid/ask prices near the top. Notice the spread. Compare AAPL (large-cap) to a smaller company.
What a suddenly wide spread signals
A stock that normally trades with a 5-cent bid-ask spread suddenly shows a 4-dollar spread during a flash-crash event. What does this widening most directly signal?
The spread is a hidden cost of trading
Check your understanding
Sit with the ideas.
A stock has a bid of $49.95 and an ask of $50.05. If you want to buy immediately, what price do you pay?
Why:
Try this in paper trading
Open your first paper position
Pick a company you already buy from — Apple, Costco, Disney, whoever — and paper-buy 10 shares. Write down WHY you'd own it: what they sell, why you'd be a customer, why you think the business will still be around in 10 years.
Open paper portfolio →Practice mode — simulated trades, not investment advice.