Bid-Ask Spread Basics: What Every Futures Beginner Must Know
The bid-ask spread is the difference between what buyers are willing to pay and what sellers are willing to accept. It’s one of the most important costs in futures trading, and most beginners ignore it until they’re leaking money on every order.
What Is the Bid and What Is the Ask?
The bid is the highest price a buyer is offering. The ask (or “offer”) is the lowest price a seller is willing to accept. The gap between them is the spread.
If ES is showing:
- Bid: 4200.00
- Ask: 4200.25
The spread is one tick. That tick is your immediate cost if you hit the market order button. If you want to understand spread behavior in detail, read your futures liquidity explained article — liquidity and spreads are tied at the hip.
Why Spreads Exist
Spreads exist because there’s never perfect agreement between buyers and sellers. Market makers, algos, and order flow dynamics all shape the spread. Here are the real drivers:
- Liquidity — Tight spreads come from deep books and lots of participation.
- Volatility — Fast markets widen spreads because uncertainty rises.
- Time of day — RTH sessions are tight; overnight can be sloppy.
- Product type — ES and NQ are tight; some micros and commodities widen easily.
How the Bid-Ask Spread Affects Execution
Any time you use a market or stop-market order, you will pay the spread. It’s unavoidable. That means:
- A long market entry fills at the ask.
- A short market entry fills at the bid.
- Stop-markets always pay the spread once triggered.
And if the market is moving fast, you’ll eat slippage on top of the spread. See your execution vs. idea article — the difference between strategy and fill quality matters.
How to Reduce Spread Costs
Spreads aren’t totally avoidable, but you can minimize them by trading smarter.
1. Use limit orders when the setup allows
Limit orders let you control your price. You avoid paying the ask blindly, which cuts spread costs immediately.
2. Trade liquid contracts
ES, NQ, CL, 6E are usually tight. Thin products like some metals and softs can jump from 1-tick to 5-tick spreads without warning.
3. Avoid dead hours
Between 3pm–5pm ET and deep overnight sessions, spreads widen and depth disappears. Your fills will always be worse.
4. Size properly
If you’re trading too much size for the visible depth, you widen your own spread by sweeping the order book.
Bid-Ask Spread vs Slippage
Spread is a fixed, visible cost. Slippage is the extra cost when price moves before your order fills. You can learn the details in the futures slippage explained article.
The Spread Is a Real Cost — Treat It Like One
The bid-ask spread is small, but it hits every trade you place. Track it, understand how your order types interact with it, and avoid trading during conditions that widen it. Beginners who ignore the spread bleed slowly; traders who respect it trade clean and controlled.