How Do Wider Bid-Ask Spreads Affect the Execution Price for Retail Traders?

Wider bid-ask spreads directly result in worse execution prices for retail traders. 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).

When this spread widens due to market maker withdrawal or uncertainty, a retail trader buying (at the ask) or selling (at the bid) pays a higher implicit transaction cost, known as slippage. This increased cost reduces the trader's effective profit margin and makes small positions less viable.