Understanding Bid and Ask Prices
The price that a buyer is willing to pay is bid price for a security.
The ask price is the price at which the seller would like to receive the order and then deliver the security.
Whenever ask or bid order takes place, it also should include the quantity of share in that transaction.
An order is considered to be filled when the required number of shares has been reached at a rate that has been requested by the buyer.
The Finer Point About Bid And Ask Prices
What is the meaning of bid and ask prices in a stock quote?
When we see the price of a stock on a chart or screen,
it is the final price that the buyer and seller had agreed as far as completion of the transaction is concerned.
However, this does not always have to be the price at which the seller and the next buyer can expect to sell or buy the same asset.
The market is made up many sellers and buyers and all are looking to complete the best possible transaction under the best possible terms that will take care of their own interests.
It is quite natural that buyers would like to pay as little as possible and sellers would like to get the best possible returns when they deliver a security.
When there is a meeting happening between buyers and sellers for some transaction,
it is referred to as taking the offer or also as taking the ask.
When seller agrees to the terms set by the buyer it is referred to as hitting the bid.
There could be many types of orders for securities and they could include limit, market, and also stop orders. However,
each come with different types of flexibility as far as the participants are concerned.
Market order does not take into account price restrictions,
and the number of shared that are ordered will have to be met regardless of the price.
When we talk about limit order, then we are referring to fulfillment of an order at a specific price,
or at a higher price as long as the number of share has been reached.
Limit order is useful for investors who are keen on only to go through the transaction if the price is okay for them.
Why There Is Difference between Ask And Bid Prices?
We need to understand something more about bid-ask spread.
This is nothing but the difference between to closet bids and ask orders.
This goes to give some idea about the market liquidity of the asset in question.
The bid-ask spread keeps changing and lower the spread means lower the liquidity in the market.
This means neither sellers nor buyers get what they would like to get without sacrificing something.
The challenge lies in finding the right liquidity that would make the entire deal good for both the buyer and the seller.
It would not be a bad idea to visit Investinc.om where you can find the right ask and bid prices.
These are available in the main page of each and every stock and also forex pair.
They will be visible just below the latest price near the top of the page.
Written By : YOUSSEF J A ALMEER
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