Hey this is Dan Meyer and today we are going
to talk about the bid and ask. Have you ever looked at a stock price and noticed there
are two prices, the bid and ask, and wondered which price do I have to pay? This is confusing
for most new traders. The bid represents the maximum price buyers are willing to pay for
a stock and the ask represents the maximum price a seller or sellers are willing to sell
their stock for. A trade can take place when the buyer and seller agree on a price for
the stock. The difference between the bid and ask is known as the spread. The spread
is often an indicator of a stocks liquidity. Stocks with a small spread are usually very
liquid and stocks with a bigger spread are usually less liquid.
When you go to buy a stock you have to pay the ask and if you go to sell a stock you
receive the bid. Let’s look at an example. Xyz stock is trading
going for 20.60×20.70 investor x whats to buy the stock from investor y. investor x
would buy the stock for 20.70 which is the ask and investor why would sell for 20.60
which is the bid. What happens to the .10 cent spread? The market maker takes that for
his profit. The bid ask spread always works to the advantage of the market maker.
So to sum up when you go to buy a stock you pay the ask and when you sell you get the
bid. Now if you’re looking for a trading strategy
that you can use to make money in the market right now, click on the link above and enter
your email and I will send you a free video I made on one of my top trading strategies.
So click here.