<p>The <strong>bid-ask <a href="/NewSite/encyclopedia/spread/" class="ency-link">spread</a></strong> in the stock market refers to the difference between the highest price that a buyer is willing to pay for a stock (bid price) and the lowest price that a seller is willing to accept (ask price).</p>
<p>Understanding the bid-ask spread is crucial for traders as it indicates the liquidity of a stock and the potential profit or loss that can be made on a trade. A wide bid-ask spread suggests lower liquidity, making it harder and more expensive to buy or sell the stock, while a narrow spread indicates higher liquidity and potentially lower transaction costs.</p>