A trade spread is when you buy and sell two similar securities simultaneously. The main objective is to assess the price difference between two securities, also known as the spread, and benefit from that difference. Trade spreads also known as relative value trading are an investing strategy used to minimize risk in a portfolio. This trading strategy also makes it possible to calculate the amount of money you’re risking beforehand. There is often a tradeoff with trade spreads, however, which is that in a bid to minimize risk, you may also minimize gains. Understanding Trade Spreads Before getting into trade spreads, let’s define what a spread is. A spread is the difference between two similar securities. The difference being measured could include yields, interest rates, or stock prices among others. The gap between two securities is often referred to as either a narrow or wide spread. When a security has high demand and volume, the spread is usually narrow. When the reverse happens, the spread tends to be wider. The good thing is investors can benefit from both narrow and wide spreads. In terms of