Bid and ask price

In the market there are two types of people: buyers and sellers.

When you want to buy a stock you offer to buy at a given price, that is call the “Bid” price.

When you want to sell, the price you want to sell at is called the “Ask” price.

So if you want to buy an stock, you can only buy at price the sellers are willing to sell (You buy at the “Ask” price).

If you want to sell a stock, you can only sell it at the price buyers are willing to buy, or so call “bid” price.

The price difference between the Ask and Bid price is called “The spread”

The bid and ask prices are thus used differently on whether you want to enter or exit a trade using a long or short position.

Figure 2.5: Type of price used for entry or exit long or short position