What is bid ask in stock market?

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What is bid ask in stock market?

What is bid ask?

Bid and ask are terms used on the stock market to designate the best buy offer (ask) and the best sell offer (bid) on an asset. These are the prices at which a counterpart is available to allow the completion of your transaction. To be able to buy an asset, you need a seller opposite and vice versa. If you place a market order on the asset, your purchase price corresponds to the ask and your sale price to the bid. The difference between the bid and the ask forms the spread .

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Relationship of the bid ask with the order book

Each order placed on the market is entered in the order book , whether for purchase or sale.
The sell orders on the asset form the bid and the best offer "the best bid" is listed at the top of the order book. This is the price at which you can buy the asset.
Purchase orders on the asset form the ask and the best offer "the best ask" is listed at the top of the order book. This is the price at which you can sell the asset.

How is bid ask evolving?

The bid and ask evolve according to the supply and demand for an asset.

When demand is high, sellers of the asset seek to sell at a higher price. They then increase their selling price, thereby raising the bid. Buyers are forced to line up and ask also goes up.

If demand is weak, buyers seek to buy cheaper. They then lower their purchase price, thereby lowering the ask. Sellers are forced to line up and the bid also goes down.

The spread between the bid and ask may vary over time, but the greater the liquidity on the security, the smaller the spread.

Asset volatility also has a strong impact on the evolution of bid ask. The more volatile an asset, the faster the bid and ask move and the greater the difference between the two.
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