Bid vs Ask
Bid and ask are terms specific to share market and forex market and reflect the prices at which sale / purchase of commodities, in these cases stocks and currencies, is made. If you have any desire to take a plunge in the share market, it is very helpful to know the definitions of these two terms and also the difference between bid and ask price.
Bid
If you have some shares and go to share market to sell them, the bid price is the offer that a share broker makes to buy out the shares from you. Thus, the price at which the market is willing to buy security from a seller is called the bid price. If you have an old Toyota and want to get rid of the car, you go to a second hand car dealer to sell it. The price he quotes for the car is the bid price. Bid is the price at which you are forced to sell at the market.
As a seller of shares, you too are entitled to a price called the ask price. The ask price is what you want from the buyers. There is always the role of a mediator in facilitating the selling of your shares in the market. This service does not come for free, and this is the reason why bid price is always lower than the sell price. One thing to remember is that when you are selling your stock you are entitled to bid prices, which always happen to be lower than the ask price (the price you want).
Ask
If you are day trading, you see the prices of stocks in two columns, the bid price and the ask price. This is also the case when you see the price band of a currency pair in the forex market. There is always a rate at which the market will sell you a commodity while there is always another price at which the market or the broker is ready to buy the commodity from you. When you are a buyer, you are quoted ask price for a stock. This price is always higher than the bid price at which the market is willing to buy the same stock from you.
What is the difference between Bid and Ask?
• Bid is the price you get from the market for your product and ask is the price you ask for the product.
• In the share market, bid price is the price at which you are made to sell shares and ask is the price at which market sells the shares to you.
• Ask price is always higher than the bid price.
• Ask price is the price a seller demands for his product.
• When you buy shares, you pay ask price, but when you sell shares, you get bid price.