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What is Bid and Ask price?

1. INVESTMENT BASICS

2. SECURITIES

3. PRIMARY MARKET

4. SECONDARY MARKET

4.1 INTRODUCTION

4.1.1 Stock Exchange

4.1.2 Stock Trading

4.2 PRODUCTS IN THE SECONDARY MARKETS

4.2.1 Equity Investment

4.2.2. Debt Investment

5. DERIVATIVES

6. DEPOSITORY

7. MUTUAL FUNDS

8. MISCELLANEOUS

9. CONCEPTS & MODES OF ANALYSIS

10. RATIO ANALYSIS

The 'Bid' is the buyer's price. It is this price that you need to know when you have to sell a stock. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell.

The 'Ask' (or offer) is what you need to know when you're buying i.e. this is the rate/ price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted 'Ask' price.

If an investor looks at a computer screen for a quote on the stock of say XYZ Ltd, it might look something like this:

Bid (Buy side)                                                            Ask (Sell side)
_____________________________________________________________
Qty.               Price (Rs.)                Price (Rs.)                   Qty.
_____________________________________________________________
1000             50.25                        50.35                         2000
500               50.10                        50.40                         1000
550               50.05                        50.50                         1500
2500             50.00                        50.55                         3000
1300             49.85                        50.65                         1450
_____________________________________________________________
Total 5850                                                                        8950
_____________________________________________________________

Here, on the left-hand side after the Bid quantity and price, whereas on the right hand side we find the Ask quantity and prices. The best Buy (Bid) order is the order with the highest price and therefore sits on the first line of the Bid side (1000 shares @ Rs. 50.25). The best Sell (Ask) order is the order with the lowest sell price (2000 shares @ Rs. 50.35). The difference in the price of the best bid and ask is called as the Bid-Ask spread and often is an indicator of liquidity in a stock. The narrower the difference the more liquid or highly traded is the stock.

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