Free Stock Market Course Part 12: Bid Ask Prices

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Chapters:
00:00 Understanding the Bid Ask Price
06:05 The Bid Ask Price in Action
Module 3 Section 4
Understanding The Bid/Ask Price
At any given moment, a stock is worth a price that is determined by the market.
The price can change many times during a trading day.
If time were to freeze, it would be noticed that there are two prices given for a Stock, Bond, Option or any trading vehicle.
The Bid Price is the price that you will receive if you’re looking to sell a particular asset.
The Ask Price (AKA Offer) is the price you have to pay if you are looking to buy a particular asset.
Bid/Ask Example
At any moment in time, an asset will have a Bid Price and an Ask (Offer) Price:
Buy 100 shares of stock:
XYZ Bid 20 Ask 20.25
If you were looking to buy XYZ, you would pay $20.25
If you were looking to sell XYZ, you would receive $20
The Bid/Ask Spread is $0.25 per share
The Size of the Bid/Ask is important but typically not as crucial for The SPX Investing Program.
There is an advantage that Individual Investors enjoy over Institutions and Hedge Funds, the trade sizes are smaller and allow for faster execution.
The Bid/Ask Spread
The Bid/Ask Spread is the difference between the price to buy and the price to sell.
The more liquidity there is for a stock, the “tighter” the Bid/Ask Spread will be.
For Investors, the desire is to have a “narrow” spread.
Illiquid assets typically have a “wide” Bid/Ask Spread.
Price Movement
Prices go up:
If more investors or traders want to buy a stock, the Ask Price will go higher until investors or traders are no longer willing to buy at that price.
Prices go down:
If more investors or traders want to sell a stock, the Bid Price will go lower until investors or traders are no longer willing to sell at that price.
It is common to see selling into strength or buying during weakness.