Every week, we provide insights into popular assets and trending market questions, helping you learn about investing in simple, bite-sized pieces.
In this edition of Markets in Focus, we’ll explain two essential terms you’ll encounter when trading CFDs: the bid/ask price and the spread.
What are the bid/ask price and the spread when trading CFDs?
When you trade CFDs (Contracts for Difference) on any asset, you will always see two prices:
- the buy price (ask)
- the sell price (bid)
Let’s use the Nasdaq index as an example.
On Monday, 24 March, Nasdaq was quoted on the Change platform at 20182.5 / 20168.2, meaning:
- If you expect Nasdaq to rise, you buy at the higher price - the ask price (20182.5).
- If you expect Nasdaq to fall, you sell at the lower price - the bid price (20168.2).
The difference between these two values is the spread.
What is the spread?
Neither the ask price nor the bid price shows the exact market price of the underlying asset.
Instead:
- The ask price is slightly above the market value.
- The bid price is slightly below it.
Spread = the difference between the ask and bid prices.
It represents the built-in cost brokers (including Change) charge for facilitating your trade.
How does the spread affect your CFD trade?
The spread acts as a transaction cost.
A tighter (smaller) spread means you pay less when opening or closing your position.
Simply put - a narrower spread is generally better for traders.
To check our latest spreads, visit: 👉 Change Spreads Overview
Key Takeaways
- Every CFD trade includes both a buy (ask) and sell (bid) price.
- The ask price is always the higher one.
- The bid price is always the lower one.
- The spread is the difference between the two.
- The spread surrounds the true market price and functions as a fee for executing your trade.
We wish you a successful trading week on the Change App.
See you next week!
