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Spread refers to the difference between the bid and ask quotes for a financial asset. This represents the difference between what a market maker is willing to pay and to accept to buy or sell a given asset. The wider the spread, the more profit the market maker expects to make per unit sold – a clear sign of lower liquidity. When liquidity is reduced, market makers expect to make more profit to cover the cost and risk of buying and selling the securities.
Spread is important to traders for a number of reasons. Firstly, it shows how much it will cost to make a trade. You will need your profit to exceed the spread before any eventual sale of your securities can be profitable. Secondly, spread is a useful guide for overall liquidity. If spreads suddenly widen, then the market may be entering a period of increased volatility and reduced liquidity.
Additionally, arbitrage opportunities exist when two market makers offer different prices, with the bid price of one below the ask price of another. These opportunities are rare in major markets, but allow for a risk-free profit when they do occur.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.
ADSS
8th floor, CI Tower
Corniche Road
PO Box 93894
Abu Dhabi
United Arab Emirates
Trading Services
ts@adss.com
+971 2 657 2414
Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.
ADS Securities LLC (“ADSS”) is authorised and regulated by the Securities and Commodities Authority (“SCA”) in the United Arab Emirates as a trading broker for Over the Counter (“OTC”) Derivatives contracts and foreign exchange spot markets. ADSS is a limited liability company incorporated under United Arab Emirates law. The company is registered with the Department of Economic Development of Abu Dhabi (No. 1190047) and has its principal place of business at 8th Floor, CI Tower, Corniche Road, P.O. Box 93894, Abu Dhabi, United Arab Emirates.
The information presented is not directed at residents of any particular country outside the United Arab Emirates and is not intended for distribution to, or use by, any person in any country where the distribution or use is contrary to local law or regulation.
ADSS is an execution only service provider and does not provide advice. ADSS may publish general market commentary from time to time. Where it does, the material published does not constitute advice, or a solicitation, or a recommendation to a transaction in any financial instrument. ADSS accepts no responsibility for any use of the content presented and any consequences of that use. No representation or warranty is given as to the completeness of this information. Anyone acting on the information provided does so at their own risk.
