Get your free company listing My Quick List Δες το στα Ελληνικά

If you cannot find what you are looking for, let us know. We will do our best to find it for you.

Giving us your email will allow companies to contact you.

This is the best way to find what you need.We will get companies to call YOU!
There is no obligation on your part.

The better your description is, the more the chances to find it for you.

Verification Code image cannot be displayed

Find it for me!

What is the Bid and Ask Spread and how to calculate it





In-between the security price (bid) and offer price (ask) there is the bid-ask price which is actually the highest price (bid) for a buyer to pay and the lowest price for a seller, to accept. When these two, come to an agreement then the transaction is accomplished.The bid-ask spread is significant to investors because it is a concealed cost incurred when trading stocks, bonds, commodities, foreign currency and so on.

Supply and demand for security determine spreads’ liquidity. When there is a good balance between supply and demand, the most fluid securities tend to not to have strong spreads and when the opposite occurs the consequence is the spread to grow wider.

Bid-ask spreads stand for a cost that beginners is not likely to realize. The cost is bigger for active traders and not so much for those who frequently trade.

If you like this article, click the Like button below so that your friends can get the chance to read it as well.

Spreads’ level of extent decrease according to of the supply-demand disparity. Sellers are willing to sell but buyers expect for lower prices. This results to a wider spread. The reason is because the risk of loss is higher throughout unstable times.

For example, a stock is trading at $9.90 / $10. The bid price is $9.90 and the offer price is $10, which means that the bid-ask spread in this case is 5 cents. A buyer who takes the stock at $5 and sells for $9.90 (bid price) would incur a loss of 50%. The purchase and instant sale of 50 shares would involve a $5 loss, as if 10,000 shares would involve a loss of $500. In both cases the loss incurred percentage is equal.

See all 11 articles in category Business

See all 8 articles in category Forex



Comment on this article

Verification Code image cannot be displayedSubmit

Please enter the text you see in the image at the left into the textbox. This is required to prevent automated submission of contact requests.