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Definition: Bid and Ask

“Bid” and “Ask” are the names given to the prices submitted by buyers and sellers in the market respectively.

Since in the trading of every financial instrument, there are people trying to buy as well as sell that instrument at any given point in time, there must exist two prices instead of one; the price that buyers are willing to pay (Bid) and the price that sellers are willing to accept (Ask). This is as true for stocks as it is for currencies.

The “Best Bid” for a stock (or any other financial instrument) is the best price (highest price) that someone is willing to pay for that stock at a particular point in time. Conversely, the “Best Ask” is the lowest price (best price) that a seller is willing to accept for a stock. A Bid is made up of an actual Buy Limit Order that has been placed in the market and is pending. An Ask is made up of an open Sell Limit Order. Traders must know exactly what Bid and Ask mean and how to use them when day trading.

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