How Does the Widening Bid-Offer Spread Impact a Trader’s Execution Price?

A wider bid-offer spread results in higher transaction costs for the trader. When a trader uses a market order, they are forced to buy at the higher ask price or sell at the lower bid price, immediately incurring the spread as a loss or cost.

This difference between the expected price and the executed price is known as slippage. In highly volatile markets, the potential for significant slippage increases, directly reducing the trade's profitability.

Using limit orders can mitigate this risk.