The bid-ask spread is the gap between the highest price a buyer is currently willing to pay for a stock (the bid) and the lowest price a seller is currently willing to accept (the ask). A trade executes when a buyer and seller agree on a price within or at either end of that gap. Narrower spreads generally reflect more actively traded stocks with plenty of buyers and sellers close to the current price, while wider spreads are more common in thinly-traded stocks, often those with lower free float or smaller market capitalization. A wide spread effectively adds a small hidden cost to trading, since buying at the ask and immediately selling at the bid would mean an instant loss equal to that gap, which is worth factoring in when trading less liquid stocks.