Bid & Ask Prices

Financial markets are fast-paced markets in order to do extremely well at trading you need to understand the basic terminologies. Bid and ask prices are one of the core terminologies. It refers to the best possible price that buyers and sellers in the market place are willing to transact at. The Biding Price is the price that the investor is willing to pay for a certain financial asset. Whereas, Asking Price is the price that the investor is willing to sell it for. In real meaning, the biding represents the demand while asking represents the supply of the financial asset.

The bid-ask spread extensively dependant on liquidity, the more liquid the market is the tighter the spreads are. In order to get clarity on spreads, investors must understand the concept of supply and demand. Supply generally refers to the volume of particular item in the marketplace; demand refers to individual eagerness to pay a particular value against the item. If there is vivid supply or demand imbalance and lower liquidity, the bid ask spread will expand to a large extent.

Bid and ask price in trading