Investing has its own language and understanding it can make it easier to be a confident investor. Two common terms you hear when people talk about investing are “bid” and “ask.” Here’s an explanation of what they mean:
In short, “Bid” is the highest price someone is currently willing to pay for a stock. “Ask” is the lowest price at which someone is currently willing to sell a stock.
* Say you decide to buy stock in XYZ Company. To buy those shares, you’ll have to pay what sellers are “Ask”ing.
1. First, you check the “Ask” price.
2. If the price looks good, you place your order.
3. The order is routed to an exchange and executed at the “ask”ing price the market is offering at that moment.
* Eventually, you decide to sell your stock in XYZ Company. Since you’re now the seller, you’ll receive the current price that the buyers are “Bid”ding – or willing to pay.
1. First, you check the “Bid” price.
2. If the price looks good, you place your sell order.
3. The order is routed to an exchange and executed at the “bid” price the market is offering at that moment.
Luckily, brokerages do all of this action behind the scenes – it’s what they get paid to do. Although the bid and ask prices for any security are great indicators of the market, keep in mind, the bid and ask prices change constantly throughout the day. The price that you get might not exactly match the bid or ask price.
Now that you’ve got your bids and asks straight, you’re on your way to becoming a savvy investor.