Stock broker spreads

Most online stock brokers will charge a spread when you place trades on their stock trading platforms. The spread is the difference between the buy and sell price of the underlying asset that is being bought or sold. It is important to consider the cost of spreads in your trading strategy, especially if day trading stocks as the spreads can quickly add up.

Some stock brokers will get their spreads direct from liquidity providers (LPs) without any interference. Usually, the deeper and more diverse the brokers liquidity pools are, the tighter the spreads will be. Other online stock brokers act as market makers and will take the opposite side of your trade instead of putting it directly through to the LPs. This particular type of “dealing desk” stock broker will usually add a mark up to spreads in order to cover costs.