The bid is the highest price a buyer is currently willing to pay for a stock, the ask (or offer) is the lowest price a seller is willing to accept, and the gap between the two is the bid-ask spread. Every trade happens when a bid and an ask meet.
What do bid and ask mean?
At any moment, a stock has buyers and sellers waiting at different prices:
- Bid. The best (highest) price someone is ready to buy at right now.
- Ask / Offer. The best (lowest) price someone is ready to sell at right now.
A trade takes place when a buyer accepts the ask, or a seller accepts the bid, the two sides agree on a price.
What is the bid-ask spread?
The spread is simply the ask price minus the bid price. For example, if the best bid is ₹100.00 and the best ask is ₹100.05, the spread is ₹0.05.
- A narrow spread usually means the stock is liquid. Lots of buyers and sellers close together, so you can trade near the last price.
- A wide spread usually means thin liquidity. Fewer participants, so buying and selling prices sit further apart and your fill price can differ more.
Where do I see the bid and ask on Rupeezy?
You see the best bids and asks (along with the quantities waiting at each price) on the market depth screen. See what market depth is and how to view it.
How does the spread affect my order?
- A market order buys at the best available ask or sells at the best available bid, so on a wide spread it can fill at a price a little away from the last traded price.
- A limit order only fills at your chosen price or better, which gives you control over the spread but no guarantee of a fill.
Things to keep in mind
- The last traded price (LTP) sits between the bid and ask and can differ from both.
- On illiquid stocks the spread can be wide, so check the market depth before placing a market order.
- Bids and asks change constantly as orders are placed and cancelled through the trading day.
Read next
What is liquidity in the stock market? — A narrow spread is the symptom. Liquidity is the cause.