Core terms
Bid-ask spread
The ask minus the bid. It is often expressed as a percentage of the midpoint so that stocks at different prices can be compared.
The spread is the cost of trading immediately. If the bid is $2.00 and the ask is $2.10, buying at the ask and selling straight back at the bid loses $0.10 a share, 4.9% of the $2.05 midpoint, before fees.
Spreads widen when liquidity is thin: in premarket and after hours, around news, after halts and in low-priced or low-float stocks. Stocks quoted at $1.00 or more trade in increments of at least a cent; below $1.00, quotes can go to four decimal places.
What traders should verify
Measure the spread as a percentage of price at the time you trade, and compare it with your planned stop distance. A 5% spread on a 3% stop leaves no room.
Do not conflate
The quoted spread is what the display shows; the effective spread you pay depends on fills, hidden liquidity and order size.