What Is the Bid-Ask Spread? Spread in Percent Explained
The bid-ask spread is the gap between the highest buy price and the lowest sell price. Learn to calculate it in percent and why it decides arbitrage profits.
Updated
The bid-ask spread is the difference between the highest price buyers are bidding and the lowest price sellers are asking in a market. It is the price you pay for trading immediately instead of waiting. Expressed as a percentage of the mid price, it lets you compare trading costs across coins and exchanges.
Key takeaways
- Spread = best ask − best bid. The mid price is the average of the two.
- Spread % = (ask − bid) ÷ mid × 100 is the standard way to compare markets.
- Buying and immediately selling costs you the full spread; one trade costs roughly half the spread relative to mid.
- Spreads are narrow in liquid markets and wide in thin or volatile ones.
- In arbitrage, the real edge is bid on the sell venue minus ask on the buy venue, not the gap between mid prices.
Bid, ask and mid price
Every order book has two sides:
- Bids are buy orders. The best bid is the highest price anyone will pay right now.
- Asks (or offers) are sell orders. The best ask is the lowest price anyone will sell at right now.
The best ask is always above the best bid. If they met, the orders would match and trade. The gap between them is the spread, and the point halfway between is the mid price, often used as the "fair" reference price.
When you place a market buy, you pay the ask. When you place a market sell, you receive the bid. The price shown in a ticker is usually the last trade price, which can sit anywhere between them.
How to calculate the spread in percent
Spread % = (best ask − best bid) ÷ mid price × 100
Two examples with illustrative numbers:
| Market | Best bid | Best ask | Spread | Mid | Spread % |
|---|---|---|---|---|---|
| Large-cap coin | $60,000.00 | $60,006.00 | $6.00 | $60,003.00 | 0.010% |
| Small-cap token | $0.9950 | $1.0050 | $0.0100 | $1.0000 | 1.000% |
A $6 spread looks larger than a one-cent spread, but in percentage terms the small-cap token is 100 times more expensive to trade. Always compare spreads in percent.
Some sources divide by the ask instead of the mid. The difference is tiny for narrow spreads, but be consistent when you compare.
Why the spread is a trading cost
Suppose you buy 1 unit of the small-cap token at the ask of $1.0050 and immediately sell it at the bid of $0.9950. You lose $0.0100, the full spread, before any trading fees. Measured against mid, each leg cost you half the spread: 0.5%.
This is why spread matters even if you are not trading back and forth. Any position you open with a market order starts slightly underwater, by about half the spread. Closing it with a market order costs the other half.
The spread is also the first layer of slippage. If your order is larger than the size at the best price, you pay the spread and then additional price impact on top.
Why the spread matters for arbitrage
Price arbitrage looks for the same asset trading at different prices on two venues. The mistake is comparing mid or last prices. What you can actually execute is:
Gross edge % = (bid on sell venue − ask on buy venue) ÷ ask on buy venue × 100
Worked example, with assumed prices and a 0.05% taker fee per leg (illustrative):
| Exchange A | Exchange B | |
|---|---|---|
| Best bid | $99.90 | $100.30 |
| Best ask | $100.10 | $100.50 |
| Mid | $100.00 | $100.40 |
- Gap between mids: ($100.40 − $100.00) ÷ $100.00 = 0.40%. This looks attractive.
- Executable edge: buy on A at the ask of $100.10, sell on B at the bid of $100.30. ($100.30 − $100.10) ÷ $100.10 = 0.20%.
- After taker fees on both legs: 0.20% − 0.05% − 0.05% = 0.10%.
Half of the apparent opportunity was just the two spreads. With wider spreads or higher fees, the same mid-price gap could be a loss.
The same logic applies to a cash-and-carry trade or a funding rate position. You cross a spread when you open each leg and again when you close it, so a two-leg position crosses four spreads over its life. On a thin perpetual market, that can consume days of funding income.
What affects the spread
| Factor | Effect on spread |
|---|---|
| High liquidity and many market makers | Narrower |
| High trading activity | Usually narrower |
| Volatility and fast price moves | Wider, as makers widen or pull quotes |
| Small-cap or newly listed tokens | Wider |
| Low-activity hours for a given market | Often wider |
| Large price tick size relative to price | Can force a minimum spread |
Market makers earn the spread by quoting both sides. When risk rises, they quote wider to protect themselves, which is why spreads often blow out exactly when many traders want to exit.
Common mistakes
- Using last price to evaluate a trade. The last trade may have printed at the bid or the ask; it tells you nothing about what you can execute now.
- Ignoring spread on the exit. The spread you see when opening a position may be much wider when you need to close it.
- Comparing spreads in dollars. Only percentages are comparable across assets.
- Forgetting size. A tight spread with very little size at the top of the book still means heavy slippage for larger orders.
How ArbTide helps
The arbitrage scanner calculates spreads from executable bid and ask prices rather than last prices, so the edge you see already accounts for crossing both books. To stack fees and spread into a net result, use the arbitrage profit calculator.
Frequently asked questions
- What is the bid-ask spread?
- The bid-ask spread is the difference between the highest price a buyer is willing to pay (the best bid) and the lowest price a seller is willing to accept (the best ask). It is the cost of trading immediately.
- How do you calculate the spread in percent?
- Divide the difference between the ask and the bid by the mid price, then multiply by 100. The mid price is the average of the best bid and best ask.
- What is a good bid-ask spread in crypto?
- There is no fixed number, but narrower is better. Major pairs on large exchanges often trade with spreads of a few hundredths of a percent or less, while small-cap tokens can have spreads of 1% or more.
- Why does the bid-ask spread matter for arbitrage?
- An arbitrage trade buys at the ask on one venue and sells at the bid on another. Comparing mid or last prices ignores both spreads and can make an unprofitable trade look profitable.
- What makes the spread wider?
- Low liquidity, high volatility and few active market makers widen spreads. Spreads also tend to widen during sharp price moves, when market makers pull or reprice their quotes.