What are bids, asks and the spread?

An order book lists offers to buy (bids) and offers to sell (asks). The highest bid and lowest ask are the best available listed prices. Their difference is the spread.

Here, the best ask is 101 and the best bid is 99, so the spread is 2 example dollars. The quantity column shows the units listed at each price. These invented values are for explanation only.

An illustrative exchange order bookAsks are 102 and 101 example dollars. Bids are 99 and 98. Best ask 101 minus best bid 99 gives a spread of 2. Prices and quantities are invented.ILLUSTRATIVE UNITS, NOT LIVE PRICESSidePriceUnitsAsk1023Best ask1012Spread = 101 − 99 = 2Best bid994Bid985
Orders can change or disappear. This is a static example, not market data.

What happens to a market or limit order?

A market order aims to execute against available offers. In this example, a market buy for three units would use two at 101 and one at 102 if the book stayed unchanged, before fees. The displayed best price is not a promise for the whole order.

A limit order specifies a price boundary. A buy limit of 99 cannot pay more than 99, but it may wait or never fill. Matching rules, fees and available quantities affect the result.

Who signs when you use an exchange account?

In a centralised custodial account, the platform controls the keys. Your displayed balance is an account record; a withdrawal is a separate action. In your own wallet, you control the keys and carry responsibility for protecting them and the recovery backup.

“Not your keys, not your coins” is a common saying about that dependence. It is not a complete comparison of the risks of each custody model.

Exchange account versus your own walletIn a custodial account, you request and the platform signs with its keys. In your own wallet, you sign and the network checks. A withdrawal connects these arrangements.Custodial accountYou request → platform signsPlatform holds the keysWithdrawalYour own walletYou sign → network checksYou protect the keys and backup
An account balance and an on-chain wallet balance are different records.

Are all exchange services the same?

Centralised exchange
A platform holds a custodial account and handles orders.
Broker app
A service presents quotes and arranges transactions. Check its custody and execution terms.
Decentralised exchange (DEX)
Trading uses on-chain mechanisms. Check the contracts, permissions and assets involved.
Peer-to-peer
Participants transact with each other. Payment arrangements and dispute handling matter.

What should you check before using one?

  • Who holds the keys, and what does a withdrawal require?
  • What fees, spreads, withdrawal limits and restrictions apply?
  • What do the terms say happens if the platform fails?
  • Which legal entity operates the service, and what registration applies where you live?

In Canada, consult the FINTRAC money services business registry and check the relevant provincial or territorial securities regulator and CIRO for the activity involved. Search the legal entity and read the scope of any registration.

A registry entry does not settle custody, solvency or every regulatory question. Requirements depend on the service and your jurisdiction. Use the official sources for current details.