The term "bid and ask" (also known as "bid and offer") refers to a two-way price quotation that indicates the best potential price at which a security can be sold and bought at a given point in time. The bid price represents the maximum price that a buyer is willing to pay for a share of stock or other security.
What does it mean when the bid price and ask price are close?
If the bid price and ask price are close together it usually means the stock is very liquid or heavily traded. This means you can have a better chance of getting your order filled at the price you want to pay or receive. What Are the Numbers Beside the Bid and Ask?
What does ask price mean?
The ask price represents the minimum price that a seller is willing to take for that same security. 1 A trade or transaction occurs when a buyer in the market is willing to pay the best offer available—or is willing to sell at the highest bid.
Why do market makers quote both bid and ask prices?
To maintain effectively functioning markets, firms called market makers quote both bid and ask prices when no orders are crossing the spread. The difference between the bid price and the ask price is called the spread. A high spread indicates that a stock has low liquidity.
