At any moment a market shows two prices: the bid, the highest price a buyer is currently willing to pay, and the ask, the lowest price a seller will accept. The gap between them is the spread, and it represents a real, if often small, cost of trading.
A market order to buy fills near the ask, and a market order to sell fills near the bid — so crossing the spread immediately puts a position slightly underwater. In liquid markets the spread is a fraction of a percent; in thin ones it can be wide enough to matter a great deal.
A limit order lets you set the price you are willing to pay or accept rather than crossing the spread, at the cost of possibly not filling at all. Understanding bid, ask and spread is the difference between knowing a price and knowing what you will actually pay.
Worked example
If the bid is $99.90 and the ask is $100.10, the spread is 20 cents, and a market buy fills near $100.10.
This definition is general education, not investment advice. Markets — especially crypto — are volatile and you can lose money. Please read our disclaimer and see our methodology.