Bid–ask spread
Okay kiddo, imagine you have a toy car that you want to sell to your friend. You tell your friend that you will sell the toy car for $5. But your friend thinks that the toy car is only worth $3. So, he offers to buy the toy car from you for $3.50. This is called a bid.
Now, you want to sell the toy car, but you also want to make sure that you get a good price for it. So, you tell your friend that you will sell the toy car for $4.50. This is called an ask.
The difference between the bid and ask prices is called the spread. In our toy car example, the spread is $1 ($4.50 - $3.50).
The same thing happens in the stock market. When people want to buy or sell a stock, they make bids and asks. The difference between the highest price that someone is willing to pay for a stock (the bid) and the lowest price that someone is willing to sell it for (the ask) is the bid-ask spread.
So, if the bid for a stock is $10 and the ask is $11, the bid-ask spread is $1. The bid-ask spread can vary depending on how many people are buying and selling the stock and how much they are willing to pay or sell it for.
Now, you want to sell the toy car, but you also want to make sure that you get a good price for it. So, you tell your friend that you will sell the toy car for $4.50. This is called an ask.
The difference between the bid and ask prices is called the spread. In our toy car example, the spread is $1 ($4.50 - $3.50).
The same thing happens in the stock market. When people want to buy or sell a stock, they make bids and asks. The difference between the highest price that someone is willing to pay for a stock (the bid) and the lowest price that someone is willing to sell it for (the ask) is the bid-ask spread.
So, if the bid for a stock is $10 and the ask is $11, the bid-ask spread is $1. The bid-ask spread can vary depending on how many people are buying and selling the stock and how much they are willing to pay or sell it for.
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