The bid-ask spread is the difference between quoted buying and selling prices for stated quantities. It is part of the execution conditions you face, not always a separate charge deducted from your account.

A Round-Trip Example

Suppose the bid is $50 and ask $50.05, quotes remain unchanged and sufficient quantity is available. Buying 100 shares at the ask and immediately selling 100 at the bid produces a $5 gross loss before commissions. Repeating that exact example 20 times gives $100, not $1; quantity must be included.

Actual fills can differ because quotes change, orders receive price improvement or quantity reaches several price levels. A limit order resting at the bid may avoid crossing the quoted spread if filled, but can remain unfilled or execute just before an adverse move.

Do Not Double-Count Costs

If your realised P&L uses actual entry and exit fills, the effect of crossing the spread is already in those prices. Subtracting the full quoted spread again overstates the cost. A backtest using midpoint prices, by contrast, needs a model of the execution prices and other charges.

Commissions are separate where charged. Some accounts advertise zero commissions, so it is inaccurate to say every trade always pays both a commission and spread as separate fees.

Quotes Have a Source and a Size

The SEC order-execution guide describes different execution routes. The spread is not necessarily captured entirely by one market maker, and a displayed order book is not every order across every venue.

For futures, distinguish price points from money value. A 0.25-point tick in a contract worth $50 per point is $12.50 per contract, not 25 cents. Verify the specification of the actual product.

Compare the Conditions You Trade

Record quoted spread, available quantity, time and fills in comparable sessions. A high daily volume or familiar symbol does not guarantee a tight spread at your entry. News, interruptions and changing liquidity can alter the picture.

A simulated evaluation may model execution rather than route an order to live liquidity. Check the product and agreement before attributing different spreads to a prop firm's routing. Our order-type guide explains the choice between price limits and execution priority.

Risk Disclaimer: Trading involves substantial risk of loss. Past performance is not indicative of future results. See our full risk disclaimer.