The bid-ask spread is the difference between the highest price a buyer is willing to pay for an asset (the bid) and the lowest price a seller is willing to accept (the ask). This spread is a key indicator of market liquidity; a smaller spread often suggests a more liquid market, while a larger spread may indicate less activity or higher risk. Traders and investors pay attention to the bid-ask spread when buying or selling assets like stocks or currencies. A narrower spread can lead to lower transaction costs, making it more favorable for those looking to enter or exit positions in the market.