In that sense, you buy at the ask price, and the seller sells at your bid price. The difference between the bid and the ask is referred to as the “bid-ask spread.” Popular stocks bid vs ask and ETFs have tight spreads, while wide spreads could indicate a lack of liquidity. The bid price is the highest price that a trader is willing to pay to go long at that moment.

That leaves one other number which is in green – the ask price. The simple way of thinking about the ask is the price you are willing to sell the security. The bid and ask https://www.bigshotrading.info/ are the prices that govern all trading activity. Check out the order book in the middle to see how much people are buying and selling for, enter your order and confirm.

Bid/Ask Spread

The bid price of a stock represents the highest price someone is willing to pay for a share. Alternatively, the ask is the lowest price someone is willing to sell their shares for. A difference in price between the bid and the ask, which we call a spread.

• The bid-ask spread is often quoted as a percentage of the mid-price rather than a dollar amount.
• The market makers’ cut is the difference between the bid and the ask.
• Conversely, if you are looking to sell immediately, you can enter your order in at the bid price.
• They’re waiting for the current price to get knocked off by an order execution or another trader to offer a higher bid or a lower ask.
• In situations of high volatility, we see drastic price changes.

In summary, the spread is the difference between the buy and sell price quoted on your trading platform and is payable on opening and closing a position. The bid-ask spread is just one factor to consider when determining the total cost of trading a security. The bid-ask spread is often quoted as a percentage of the mid-price rather than a dollar amount. For example, if the bid price is $2.50 and the ask price is $2.60, the spread is 10 basis points or 0.10%. During volatile conditions, traders would be wise not to place market orders unless they are completely necessary.

Key Differences Between Bid Price vs Ask Price

If the investor decides to sell their shares through a market order, they will receive $103. The investor’s profit per share is $2, even though the stock price rose by $3. The $1 of profit leakage reflects the $1 bid-ask spread on this stock.