Listen to a Business English Dialogue About Bid asked spread
Arianna: Hi Alan, do you know what a bid-ask spread is in business and finance?
Alan: Hi Arianna, yes, the bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security.
Arianna: Got it. So, why is the bid-ask spread important for traders and investors?
Alan: Well, Arianna, the bid-ask spread represents the transaction cost for buying and selling securities, and it reflects market liquidity and efficiency.
Arianna: I see. How does a narrow bid-ask spread benefit traders?
Alan: Arianna, a narrow spread means there is less difference between buying and selling prices, reducing trading costs and potentially increasing profits for traders.
Arianna: That makes sense. And what about a wide bid-ask spread?
Alan: A wide spread indicates lower liquidity and higher transaction costs, which can make it more challenging for traders to execute trades efficiently and profitably.
Arianna: I understand. How do traders assess bid-ask spreads before making investment decisions?
Alan: Traders typically monitor bid-ask spreads to gauge market conditions, assess trading costs, and determine the best time to enter or exit positions.
Arianna: That sounds important for making informed decisions. Thanks for explaining, Alan.
Alan: You’re welcome, Arianna. Understanding bid-ask spreads can help traders navigate the financial markets more effectively.