Every week we provide insights into popular assets and hot questions, so you can easily learn more about the investment market in bite-sized pieces.
In this edition of Markets in Focus, we’ll break down two key terms you encounter when trading CFDs: the bid/ask price and the spread.
What are the bid/ask price and spread in your CFD trade?
When you trade CFDs (Contracts for Difference) on an asset, you’ll always see two prices: the buy price and the sell price.
Let’s use the Nasdaq index as an example.
On Monday, 24th March, Nasdaq was quoted on the Change platform at 20182.5 / 20168.2, which means:
If you believe Nasdaq will rise, you can buy at the higher price – known as the ask price – of 20182.5.
If you think Nasdaq will fall, you can sell at the lower price – called the bid price – of 20168.2.
The difference between these two prices is called the spread.
What is the spread?
Neither the buy price nor the sell price reflects the exact market price of the asset.
Instead:
The ask price (buy price) is slightly above the market value.
The bid price (sell price) is slightly below it.
The spread is simply the difference between the two. It’s the way brokers like Change charge for facilitating your trade.
How does the spread affect your trade?
The spread acts as a built-in fee. The tighter (smaller) the spread, the less cost you incur when opening or closing a position. A narrower spread is generally better for traders.
To see our latest spreads, simply check out the following link: 👉 Change Spreads Overview
Key Takeaways:
Every CFD trade shows you both a buy (ask) price and a sell (bid) price.
The ask price is always the higher of the two.
The bid price is the lower figure.
The spread is the difference between the ask and bid prices.
The spread wraps around the true market price and functions as a fee for executing your trade.
We wish you a successful trading week on the Change App.
Until next week!
