Glossary

This glossary contains the fundamental terms you need to know to trade on Interactive Brokers and understand how financial markets work.

Spread

The spread is the difference between the buy price (Bid) and the sell price (Ask) of a financial asset in a market.

It is a fundamental concept in stock trading, as it represents the implicit cost of executing a transaction. A narrow spread usually indicates a liquid and efficient market, while a wide spread may reflect lower liquidity or higher volatility.

Example:

If the buy price of a stock is €10.00 and the sell price is €10.05, the spread is €0.05.

Bid

The term “Bid” refers to the highest price that buyers are willing to pay for an asset at a given moment.

It is the price at which you can sell immediately if you decide to execute a sell order in the market.

Ask

The term “Ask” refers to the lowest price at which sellers are willing to offer an asset at a given moment.

It is the price at which you can buy immediately if you decide to execute a buy order in the market.