Why it matters
Widening spreads are ‘hidden volatility’. They trigger stops, distort entries, and can make a strategy fail even when the chart looks calm.
Operational use: this is how the market taxes urgency. When it appears, slow down or size down.
Common trap
Holding tight stops through rollover, illiquid hours, or around major scheduled events as if spread is constant.
Example
Price never touched your stop on the chart, but your stop order executes because the bid/ask expanded over your level.
Operational cue: if you can’t point to it on the chart, in the DOM, or in your broker logs, treat it as a story and trade smaller.
Notes
Quick rule
- If you see this repeatedly, you are in a different regime than your model assumes.
- Regime change usually means position size change.
- When in doubt: trade smaller, or don’t trade.