Bid
Tue, Apr 15The term “bid” denotes the maximum price a buyer is prepared to pay for a security, which can include stocks, bonds, or commodities.
When you intend to sell a security, the bid price represents the amount at which you can make the sale.
This is the converse of an ask, which indicates the price a seller is willing to accept to relinquish a financial instrument.
In the forex market, this is the price at which you, as a trader, can sell the base currency.
Bids typically consist of two components:
- The price the buyer is ready to pay
- The quantity of the financial instrument they wish to acquire.
A trade occurs when a corresponding bid and ask are matched.
For instance, if a trader places a bid of 110.25 for 1,000 units of USD/JPY, the trade will be executed when a seller agrees to that price and quantity.
The bid (the price at which you can sell an asset) is always quoted lower than the ask, and the difference between the two is referred to as the spread.
The bid and ask concept is essential to understanding how trading and pricing of securities function.
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