Business News: What is Bid and Ask in Stock Market? Everything You Need to Know

Business News:  Understanding the bid-ask mechanism is important for anyone trading in the stock market since it influences trade execution and costs. A narrow spread usually suggests significant liquidity, whereas a broader spread implies higher risk and lower trading activity. A transaction does not take place if the buyer and seller cannot reach an agreement. To minimize financial loss and make informed investment decisions, it is critical to understand these fundamentals or consult a financial counselor prior to investing.

Bid and Ask in Stock Market

The terms “bid” and “ask” are fundamental in stock market trading. The bid price is the highest amount a buyer is willing to pay for a stock, whereas the ask price is the lowest amount a seller will take. The difference between these two prices is known as the spread. A transaction occurs when the bid and ask prices match or are near enough that either the buyer raises their bid or the seller lowers their offer. This is analogous to marketplace bargaining, in which the buyer proposes a lower price and the seller requests a higher one.