Bid ask stock market

Keep in mind that the ask price is always higher than the bid price … after all, no one wants to lose money doing business. These prices are constantly changing, so the bid is simply the highest quoted price at that very moment , and the ask is the lowest. The spread is the difference between the bid and ask prices.

The Bid/Ask Spread, and How it Costs Investors

The bid-ask spread would be 5 cents. In general, the smaller the spread, the more liquid actively traded the security.

So what happens to the difference between the bid and ask prices? The market maker the individual or firm that quotes the bid and ask prices for a given security pockets it for profit.

investing - Can someone explain a stock's "bid" vs. "ask" price relative to "current" price? - Personal Finance & Money Stack Exchange

These companies receive payment as a compensation for risk. In a normal, liquid market, there are usually plenty of people willing to buy when you want to sell and sell when you want to buy.

In such cases, a market maker must make bids and offers from its own account in order to make sure that market transactions keep running smoothly. Obviously, this is a risky move for the market maker, as it could lose money if the stock sells for lower than purchase price.

The NYSE and other listed exchanges ASE, Midwest, Boston, Pacific, etc. The size of the bid-ask shows how many shares the specialists have available at those prices.

For example, if an investor wanted to buy shares of Poppins Purses, the bid size would be shares. As we mentioned above, lower liquidity means larger bid-ask spread. This is why we Fools generally recommend limit orders , which allow you to buy or sell a stock with a specific price target in mind.

If you want to see what some of our Fools have to say about limit and market orders, check out the articles written by two of our most Foolish specialists, Tim Beyers and Selena Maranjian.

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Home General Investing How do bid-ask prices work in stock trading? How do bid-ask prices work in stock trading? Spread The spread is the difference between the bid and ask prices. Three cheers for simple arithmetic! Risk compensation So what happens to the difference between the bid and ask prices?

What does the spread and bid-ask size mean for you?