What is the Difference Between Bid and Ask?

The terms "bid" and "ask" refer to the highest price a buyer will pay and the lowest price a seller will accept for a specified number of shares of a stock at any given time, respectively. The difference between the bid and ask prices is called the "spread". Here are the key points about bid and ask:

• Bid Price: The bid price represents the highest price that traders are willing to pay for a security.
• Ask Price: The ask price represents the lowest price that the owners of a security are willing to sell it for.
• Bid-Ask Spread: The difference between the bid and ask prices, or the spread, is an indicator of the liquidity of the asset. In general, the smaller the spread, the better the liquidity.

Market participants, such as investors from big institutions, financial advisors, and individual retail investors, drive prices. A trade or transaction occurs when a buyer in the market is willing to pay the best offer available. The bid and ask prices are important because they indicate where the market participants are willing to transact, and the spread represents the market maker's profit.

Comparative Table: Bid vs Ask

The bid and ask prices are crucial components of stock trading. Here is a table summarizing the differences between them:

The bid and ask prices are determined by the actual buying and selling decisions of the people and institutions who invest in the security. Bid and ask prices can change frequently as traders react to new information and market conditions, leading to fluctuations in the bids and asks.