What is Bid Price and Ask Price?

The bid and ask price are two key terms in stock market trading. The bid price is the highest price a buyer will pay for a security, while the ask price is the lowest price a seller will accept. The gap between them is called the bid-ask spread. Today, as more people use online platforms and mobile investing tools, understanding what is bid price and ask price is more important than ever. These prices shape how trades happen and how investors respond to market demand and supply. This article explains what is bid price and ask price, their differences and why it's important. 

What is Bid Price?  

The bid price is the highest price a buyer is willing to pay for a stock at a given moment.  

Key points: 

• It shows the current demand for a stock.  
• It is set by buyers placing purchase orders in the market.  
• The highest active buying order becomes the bid price.  
• If traders sell at market price, their trade usually executes at the bid price.  
• A rising bid price may reflect strong buying interest.  

Example: 

If a stock is quoted at ₹250 (bid) – ₹252 (ask), buyers are ready to purchase it at ₹250. If sold immediately, the order will likely be matched at ₹250.  

What is Ask Price?  

The ask price is the lowest price a seller is willing to accept for a stock.  

Key points: 

• It reflects the supply side of the market.  
• It is set by sellers placing sell orders.  
• The lowest active selling order becomes the ask price.  
• If a trader purchases at market price, their trade usually executes at the ask price.  
• A falling ask price may signal selling pressure.  

Example: 

Using the same quote — ₹250 (Bid) – ₹252 (Ask) — sellers are willing to sell at ₹252. If a trader buys instantly, they will likely pay ₹252.  

What is the Difference Between Bid Price and Ask Price?  

The key difference between bid price and ask price is shown in the table below.  

The difference between the two prices is known as the bid-ask spread. In most cases, a narrow spread shows high liquidity, while a wider spread may indicate lower trading activity.  

Why are Bid and Ask Prices Important?  

Here’s why these prices matter in practice: 

1. They Show Real-Time Demand and Supply  
   Bid and ask prices give a quick view of how the market values a stock at that moment.  
2. They Decide the Trade Price  
   If a trader places a market order, the bid or ask price determines the final execution rate.  
3. They Reflect Liquidity  
   A small spread often means active trading and smoother transactions. This makes entry and exit easier.  
4. They Indicate Market Conditions  
   Frequent changes in bid and ask prices can reflect volatility. In a fast-changing space, this information helps investors stay alert.  
5. They Help Estimate Trading Cost  
   The spread acts as an indirect cost. Keeping this in mind helps investors plan better.  

Overall, from first-timers to seasoned users, these prices work for different needs. Regardless of experience, knowing how they function makes a real difference in trading decisions.  

Conclusion 

Understanding what is ask and bid in stock market is crucial. The bid price and ask price represent the buying and selling sides of a stock in the market. The bid shows what buyers are willing to pay, and the ask shows what sellers expect to receive. The difference between them forms the bid-ask spread. A clear understanding of these terms supports better trade decisions and execution timing. Investors who monitor these prices through a share trading app can track market movements and place orders with greater clarity.