Bid-Ask Spread — Why There Are Two Prices — In Plain Words
This page is educational only. It is not financial advice.
Short answer
There are two prices because the price a buyer is willing to pay and the price a seller is willing to accept are not the same price.
The difference between those two prices is called the bid-ask spread.
What this page covers
This page explains the bid-ask spread, in plain words. It is based on one page from FINRA: “Understanding Market Liquidity and Your Investments.”
The two prices
The bid is the price a buyer is willing to pay.
The ask is the price a seller is willing to accept.
The bid-ask spread is the difference between the price a buyer is willing to pay (the bid) and the price a seller is willing to accept (the ask).
Wide and narrow spreads
Illiquid investments often have a wide bid-ask spread.
A narrow spread can indicate good liquidity but doesn’t provide a complete picture on its own.
The spread as a cost
Market liquidity can affect investment returns.
Large bid-ask spreads can reduce returns by increasing the buy price or lowering the sell price.
Sources
Source used for this page:
- FINRA, “Understanding Market Liquidity and Your Investments”: https://www.finra.org/investors/insights/market-liquidity-risk
The official page this guide rests on is short on this topic, and this guide adds nothing from outside it.
Checked November 2, 2026.
This page is educational only. It is not financial advice.