A two-way price quotation that indicates the best 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 or buyers are willing to pay for a security. The ask price represents the minimum price that a seller or sellers are willing to receive for the security.

A trade or transaction occurs when the buyer and seller agree on a price for the security. The difference between the bid and asked prices, or the spread, is a key indicator of the liquidity of the asset - generally speaking, the smaller the spread, the better the liquidity.

Bid And Asked

The average investor has to contend with the bid and asked spread as an implied cost of trading. The bid-ask spread works to the advantage bid ask spread dynamics in foreign exchange markets the market maker.

The spread represents the market maker's profit. Bid-ask spreads can vary widely depending on the security and the market. The blue-chips that constitute the Dow Jones Industrial Average what is the difference between primary and secondary stock markets have a bid-ask spread of a few cents, while a small-cap stock may have a bid-ask spread of 50 cents or more.

Bid-ask spread dynamics in foreign exchange markets

On a percentage basis, the difference between the bid and asked prices of the former may be much smaller than that of the latter. The bid-ask spread can widen dramatically during periods of illiquidity or market turmoil, since traders will not be willing to deca.org stock market game a price beyond a certain threshold while sellers may not be willing to accept prices below a certain level.

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The Electronic Trading Systems and Bid-Ask Spreads in the Foreign Exchange Market by Liang Ding, Jonas Hiltrop :: SSRN

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