Stock market bid ask price

You've probably heard the terms spread or bid and ask spread before, but you may not know what they mean or how they relate to the stock market. The bid-ask spread can affect the price at which a purchase or sale is made — and an investor's overall portfolio return. What this means is that, if you want to dabble in the equities markets , you need to become familiar with this concept.

Investors must first understand the concept of supply and demand before learning the ins and outs of the spread. Supply refers to the volume or abundance of a particular item in the marketplace, such as the supply of stock for sale. Demand refers to an individual's willingness to pay a particular price for an item or stock. The spread is the difference between the bid and asking prices for a particular security.

The size of the spread and price of the stock are determined by supply and demand. The more individual investors or companies that want to buy, the more bids there will be, while more sellers would result in more offers or asks.

How Does the Law of Supply and Demand Affect Prices? On the New York Stock Exchange NYSE , a buyer and seller may be matched by computer. However, in some instances, a specialist who handles the stock in question will match buyers and sellers on the exchange floor. In the absence of buyers and sellers, this person will also post bids or offers for the stock to maintain an orderly market.

On the Nasdaq , a market maker will use a computer system to post bids and offers, essentially playing the same role as a specialist. However, there is no physical floor. All orders are marked electronically. For more, take a look at The NYSE and Nasdaq: It is important to note that, when a firm posts a top bid or ask and is hit by an order, it must abide by its posting. In other words, in the example above, if MSCI posts the highest bid for 1, shares of stock and a seller places an order to sell 1, shares to the company, MSCI must honor its bid.

The same is true for ask prices.

An individual can place five types of orders with a specialist or market maker:. The bid-ask spread is essentially a negotiation in progress. To be successful, traders must be willing to take a stand and walk away in the bid-ask process through limit orders.

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

By executing a market order without concern for the bid-ask and without insisting on a limit, traders are essentially confirming another trader's bid, creating a return for that trader. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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The Basics of the Bid-Ask Spread By Glenn Curtis Updated June 6, — 8: Supply and Demand Investors must first understand the concept of supply and demand before learning the ins and outs of the spread.

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

Example — How Supply and Demand Work Together Suppose that a one-of-a-kind diamond is found in the remote countryside of Africa by a miner.

The miner says she wants a day or two to think about it. In the interim, newspapers and other investors come forward and show their interest.

The new asking price of that diamond is going to go up. The following day, a miner in Asia uncovers 10 more diamonds exactly like the one found by the miner in Africa. As a result, both the price and demand for the African diamond will drop precipitously because of the sudden abundance of the once-rare diamond.

This example — and the concept of supply and demand — can be applied to stocks as well. For more, see How Does the Law of Supply and Demand Affect the Stock Market? The Spread The spread is the difference between the bid and asking prices for a particular security.

Types of Orders An individual can place five types of orders with a specialist or market maker: Market Order — A market order can be filled at the market or prevailing price.

Limit Order — An individual places a limit order to sell or buy a certain amount of stock at a given price or better. For additional reading, see How Do Limit Orders Work? Day Order — A day order is good only for that trading day. If it is not filled that day, the order is canceled. Fill or Kill FOK — An FOK order must be filled immediately and in its entirety or not at all.

Stop Order — A stop order goes to work when the stock passes a certain level. What's the Difference Between a Stop and a Limit Order? The Bottom Line The bid-ask spread is essentially a negotiation in progress.

It's very important for every investor to learn how to calculate the bid-ask spread and factor this figure when making investment decisions. Buying and selling stock can be a lot like buying or selling a car. Traders should use and understand tools such as market orders, limit orders, day orders, and good-'til-canceled orders to ensure With stop-limit orders, buyers protect themselves from prices too high for their tastes.

Find out how stocks are traded in the market, why the bid and ask prices are different and why the bid-ask spread is smallest Understand how buy limit orders work, and factors such as the bid-ask spread and market volatility that traders must consider Understand the concept of the bid-ask spread as it applies to trading and how it impacts the pricing of limit orders used Learn what the bid and ask prices mean in a stock quote.

Find out what represents supply and demand in the stock market and Using a limit order to buy a stock can be helpful in securing certain prices, but the mechanics of a limit order can decrease An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other.

A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over No thanks, I prefer not making money.

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