The bid is the best price anyone is currently willing to pay; the ask is the lowest anyone will sell for. The difference is a cost you pay on entry and again on exit, whether or not it appears as a fee.
A quoted price is usually the last trade, but you cannot necessarily transact there. Buying at market pays the ask; selling at market receives the bid.
The difference is why a position can show a small loss the instant it is opened. Nothing has gone wrong — you bought at one price and are being valued at the other.
Heavily traded large companies often quote a spread of a cent or less, because many participants compete to be the best price.
Thinly traded and smaller companies can quote spreads of several percent. On a round trip that cost is paid twice, and it can exceed anything a commission would.
Spreads widen outside regular hours, around news, and during volatility — the moments when the incentive to trade is strongest.
This is one reason an extended-hours price can look dramatic: the quote may sit far from where a real transaction would clear.
A market order accepts whatever the book offers, which is fast and, in a wide spread, expensive. A limit order names the worst price you will accept.
The trade-off is certainty of price against certainty of execution: a limit order may simply not fill.
One question, no account: what did you come here for, and did you find it? A person reads these, and they shape what gets written next.
From StockMotive — the honest why behind every market move. Educational information only, not investment advice.