Bid vs Ask Price: What They Mean and Why the Spread Costs You

What are the bid and ask prices?

Look at a share, a currency or a coin in a trading app and you will usually see two prices, not one.

The bid is the highest price a buyer is offering right now. The ask is the lowest price a seller will take right now. Some apps call the ask the "offer". The ask is higher than the bid.

Here is what that means for you. If you want to buy straight away, you usually pay the ask. If you want to sell straight away, you usually get the bid.

A money exchange desk at an airport works the same way. It buys euros from people at one price and sells euros to people at a higher price. The gap between the two pays the desk.

We will use one example in this lesson. A share is quoted at a $24.90 bid and a $25.10 ask. Buy now and you pay about $25.10 a share. Sell now and you get about $24.90.

What is the spread, and why does it cost you?

The gap between the bid and the ask is called the spread. In our example it is $25.10 minus $24.90, so $0.20 a share.

The price exactly in the middle is the midpoint: $25.00. So the spread is 0.20 ÷ 25.00 = 0.8% of the price.

Buying and then selling again is called a round trip. Each round trip pays the spread once. To get back to even, the bid has to climb from $24.90 to $25.10, the price you paid.

A wider spread costs more. With a $24.80 bid and a $25.20 ask, the spread is $0.40, or 1.6% of the $25 midpoint. The same 10-share round trip now costs $4.

Small costs add up if you trade often. Do 20 quick round trips a month at $2 each, and they cost $40 before any commission.

Why are some spreads small and others wide?

The spread depends mostly on how many people are buying and selling. Traders call this liquidity. A share that trades all day in large amounts usually has a small spread. A small company, or a coin that few people trade, can have a much wider one.

Spreads also change during the day. They often get wider around big news, when prices jump and sellers want more room. They can also widen when a market is quiet, for example outside its main trading hours.

A very wide spread can be a warning sign. It may mean there are few buyers and sellers, so getting out at a fair price could be hard.

A small spread is good news for your costs, but it does not make a trade safe. It says nothing about whether the price is fair or where it goes next. Compare spreads together with your other costs in our guide to brokerage fees.

Is the price on the chart the price I will get?

Not always. A chart often shows the last price: the price of the most recent trade. That trade is already over. The price you can get now is the current bid or ask.

The quote can also be too small for your order. Picture a tiny order book, the list of what buyers and sellers are offering. One seller offers 5 shares at $25.10. Another offers 5 shares at $25.20. You want 8 shares now.

If those offers stay in place, the first 5 shares cost 5 × $25.10 = $125.50. The other 3 cost 3 × $25.20 = $75.60. You pay $201.10 in total, or about $25.14 a share. The $25.10 ask was real, but only for 5 shares.

Prices can also move between the moment you look and the moment your order arrives. In the US, the SEC explains how the way an order is handled changes what it costs.

Should I use a market order or a limit order?

A market order says: fill this now at the best price available. When you buy, you usually pay around the ask. You get speed, but not a fixed price.

A limit order sets the worst price you will accept: the most you will pay, or the least you will take. You control the price, but the order may not fill.

In the small order book above, a buy limit at $25.10 could get the 5 shares offered at that price. The other 3 might wait, unfilled. A buy limit at $25.00, between the bid and the ask, does not force anyone to sell to you.

Before you confirm any order, check that the prices are live, not delayed. Look at the bid, the ask and the amount on offer, and read the order preview. The SEC has a short guide to order types. For stop orders and more examples, read our market, limit and stop orders lesson.

Do forex and crypto have a bid and ask too?

Yes. The idea is the same in every market. In forex, a pair like EUR/USD shows a bid and an ask, and busy pairs often have very small spreads. Learn the quote format in how to read currency pairs, then see what the spread costs in forex.

Crypto works the same way. A big coin on a busy exchange may have a small spread. A coin that few people trade can have a very wide one, so every round trip costs more. Some apps also build an extra charge into the price they show. Read crypto orders and fees to compare.

Gold, oil and other commodities are quoted with a bid and an ask too. Whatever you trade, the rule is the same: you usually buy at the higher price and sell at the lower one. To watch real bid and ask prices with virtual money, compare free stock market simulators.