Glossary

Bid price

Bid price, or simply bid, describes what a buyer is willing to pay for a security. It is contrasted with the ask price, the amount a seller is willing to sell a security for. The difference between the two is known as the ‘spread’, which is the cost traders pay to open and close positions.

Bid vs Ask prices

The bid-ask spread is the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. An individual trader looking to sell will receive the bid price while one looking to buy will pay the ask price.

Market makers facilitating these trades are involved in both the selling and buying of securities. The spread is the principal transaction cost of trading and is collected by the market maker by processing multiple orders at both the bid and ask prices.

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