A tight spread looks unambiguous. It is visible, comparable, and easy to treat as a proxy for the quality of the trading environment. In a quiet session, it can be. But spread conditions during orderly markets describe a specific set of circumstances. They do not describe what happens when those circumstances change.
The pressure test begins when the market moves quickly. "A tight spread is useful information, but it is still a snapshot," says Michael Stark, Financial Content Lead at Exness. "To understand the quality of the trading environment, you have to see what happens when volatility rises and that snapshot is put under pressure."
