Understanding Bid and Ask Prices

How to get the best prices buying and selling stocks – Bid Price and Ask Price

Imagine you’re at a flea market. You head over to one of the stands and see a baseball card that you want. And even though you really want it, you won’t pay just anything for it. Instead, you want the best (lowest) price for it. Because it’s a market, you’re able to negotiate for it.

The seller sets his price at $30. That’s his ask price.

You are willing to pay $20 for the card. That your bid price.

You can choose to to raise your bid, wait for the seller to drop his ask or go find another seller. This is exactly how bid and ask work on the stock market. Except there are millions  of traders buying and selling thousands of different stocks every day.

At its core “bid” is the highest price someone is willing to pay to buy a stock. “Ask” is the lowest price someone is willing to sell their stock for.

But first.. the “last price”

Before we dive into the bid and the ask, we should explain the “last price”. When you hear someone say that Apple is trading at $400, it doesn’t mean that you could buy apple for that price. What that price actually refers to is the last price that it was traded at. There is no actual current price – that’s what the bid and the ask are for.

The Bid and the ask

There are always two prices to any trade:

  • The bid: the price that someone is willing to pay for a share
  • The ask: the price that someone is willing to sell their share for.

The stock market has bid and ask prices for each and every stock. You can find this on the stock quote page on WallStreetSurvivor.com. (NOTE: you have to be logged into your account to view stock quotes)

The Bid Price

The bid is the price someone is willing pay for a share of Google.

Check out Google’s quote. If you owned Google’s stock and wanted to sell it you’d want to know what someone would be willing to pay for it. Easy. Look at the bid price. The highest that someone would be willing to buy Google is $581.25. So if you decided to sell your stock, you’d be able to sell it for $581.25.

Practice by: selling one of the stocks in your portfolio. Mark down the bid price from the quote page, and check out what price your sell order is filled at.

The Ask Price

The ask is the price someone is willing to sell a share of Google for.

Now if you wanted to buy some shares of Google, you’d want to know how much someone would be willing to sell it for, right? So have a look at the ask price. The lowest someone is willing to sell Google for is $581.51. So if you wanted to buy Google right now, you could buy it for that price.

Practice by: buying 10 shares of Google on Wallstreetsurvivor.com. Remember, don’t look at the last price, look at the ask.

So How Do I Open a Robinhood Account and Get up to $1,000 in FREE STOCK?

To open a Robinhood account, all you need is your name, address, and email. If you want to fund your account immediately, you will also need your bank account routing and account number.

As its current promotion, Robinhood is giving away a FREE STOCK (valued at $5 to $500) to anyone that opens a new account this month if you click on the promo image below.  Then, once you open and fund YOUR account with at least $10, you will receive more free stock (again valued at $5 to $500) for referring your friends and family. The more people you refer, the more free stock you get. Click on this promo below to start your Robinhood account application and get your first FREE stock.....

Is Robinhood Safe? Get Free Stock

Bonus Tip:  Use this link to get a free stock (up to $500 value) when you open and fund your account with at least $10:  sign up for Robinhood today, you'll get a free stock (up to $500 value!) FURTHERMORE, for each friend that you refer, you will receive ANOTHER free stock valued at up to $500. This is perfectly legit and you WILL get more free stock for every friend or family member you refer.

Why do they give away so much free stock? Because they spend their advertising dollars this way instead of buying TV, radio, print, or online ads! They WANT you to refer friends!


Order Types

If “set it and forget it” is your kind of investment strategy, than order types are for you. Orders: managing your portfolio so you don’t have to.

Imagine having a full-time stock broker sitting there watching the market, poised to buy or sell stock as soon the price reaches a certain level. That’s precisely what market orders do.

When it comes managing your portfolio, orders aren’t just classified as either buy or sell. In particular, orders can be classified according to the price at which the broker will execute them: market and limit orders.

Market orders are orders for buying or selling at the current market or best available price in order to get the transaction done immediately. When it comes to market orders, there’s a difference between bid and ask prices.

Bid And Ask Prices

If you’re looking to sell your Google shares as quickly as possible, you should sell down and hit the current bid (buy) price. Doing so will ensure your order is instantly executed because it’s the highest price at which people looking to buy Google shares.

On the other hand, you should buy up to hit the current ask (sell) price if you’re looking to immediately get your hands on shares of Google. Doing so will ensure that your order is immediately executed because the current ask price is the lowest price at which people holding shares of Google (or just about any other stock) are currently willing to sell at.

Keep in mind though that a stock’s last-traded price isn’t always the price at which the market order will be executed. It’s possible that the last executed trade prior to your market buy order (hitting up the ask price) was one where a seller hit down the bid price). If that happens, your market order will be done at a price that’s higher than the last traded price. Conversely, if you execute a market sell order (hit down the bid price) and the last trade was one where the stock was bought up at the ask price, the price at which your market order’s executed will be less than the last traded price.

Using Limit Orders – For more advanced (but curious) traders

 

A limit order, on the other hand, is one where you set a limit regarding the price at which you want to transact a stock. If you set a limit of $ 750 in buying a share of Google’s stock (the buy limit), such an order guarantees you won’t pay more than that amount per share. It’s even possible to pay less! When you’re selling your Google shares and you set a limit of $800, it means the order will be executed at a minimum price of $800 per share, possibly even more.

In the two examples above, the buyer and the seller had no choice but to trade at the listed bid and ask price. But in practice you have the ability to choose your bid and your ask using limit order (Note: It’s for slightly more advanced traders, so feel free to skip).

Look at the Google quote above. The bid is $581.25 and the ask is $581.51. If you wanted to buy Google, you would look at the ask price.

Now, imagine you only have $575 in your account and you think Google’s price will go down. You would set a limit buy order with a target price of $575. This way, whenever the ASK price of google goes down to $575, your order will execute. The opposite is true if you wanted to sell a stock only at a certain price. You would set a limit sell order, and wait till the BID price reached it.

Sometime you bid… sometimes you ask

So there you have it – bid and ask, explained. Understanding the basics of bid and ask are important to help you understand exactly how trades are processed. So next time you make a trade, remember: don’t look at the last price like an amateur; instead have a look at the bid and the ask!


 

Still unclear?

Try the WSS course: Understanding Advance Technique to learn more about Bid and ask prices, as well as other advanced trading techniques.



*** SPECIAL ALERT -- July 25, 2020 -- TWO of THIS YEAR'S Motley Fool Stock Picks Have Already DOUBLED and ONE Has Already TRIPLED in just 7 Months! ****

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's 4+ years, 55 months and 110 stock picks. As of Friday, July 24th, two of their twelve stocks picks from 2020 have already doubled (SHOP and ZM) and another one has tripled (TSLA)--all in just the first 7 months of 2020. In addition, 6 of their 2019, 8 of their 2018, 9 of their 2016 and 11 of their 2016 picks have also doubled. Best of all, over these 55 months, the average stock pick is up 128%. That beats the SP500 by an average of 93%. And that's even accounting for all of this COVID mess that has wreaked havoc on most stocks. BUT, the Fool has done so well because they have quickly identified stocks this year that will perform well in the post-COVID world. THAT is how the Fool consistently does so well--they adapt and constantly pick stocks before everyone else realizes the opportunities.
  • Shopify (SHOP) – April 2, 2020 pick and it is already up 168%
  • Zoom Video (ZM) – March 19, 2020 pick and it is already up 99%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 39%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 229% compared to the SP500 -1% so it is ahead of the market by 228%
  • HubSpot (HUBS) picked December 5, 2019 and it is up 52%
  • Netflix (NFLX) picked November 21, 2019 and it is up 54%
  • Trade Desk (TTD) picked November 11, 2019 and up 121%
  • Zoom Video originally picked Oct 3 and it is up 259%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 78%
Now, no one can guarantee that their next picks will be as strong, but our 4.5 years of experience has been super profitable. They also claim that since inception, their average pick is up 504% and now we believe them. Many analysts are saying that we have passed the bottom of this COVID crisis and "certain" stocks will recover quickly and be the new leaders. So make sure you have the right stocks in your portfolio.

Normally the Fool service is priced at $199 per year but they are currently offering it for just $99/year if you click this link

If you order today, you will get these upcoming stock recommendations:

  • August 13 - Tom's New 5 Best Buys Now
  • August 16 - Tom's New Single Stock Recommendation
  • August 20 - David's New Single Stock Recommendation
  • August 27 - David's New 5 Best Buys Now

CLICK HERE to get The Motley Fool's Stock Picks for just $99 per Year! 



Save

Save

Save

Save

Save