The bid-offer spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (offer or ask). A narrower spread indicates higher liquidity and lower transaction costs, while a wider spread signals lower liquidity. The spread is a key cost of trading and varies by asset class, market conditions, and time of day. During high-volatility events, spreads tend to widen significantly.
Example
“The bid-offer spread on EUR/USD widened from 0.5 pips to 5 pips during the central bank announcement as liquidity evaporated.”