A bid price is the highest price at which a buyer is willing to purchase a stock. Conversely, the ask price is the lowest price at which a seller is willing to sell a stock. The role of the stock market is to match buyers with sellers at a price at or nearest to their threshold.  The difference between the ask price and the sell price is called the “spread” and it is kept by the broker. This is not the same as the commission, which is paid regardless of the spread. Generally, stocks that trade with the most volume will have the smallest spreads while stocks that trade with less volume (such as OTCBB, penny stocks or pink sheet stocks) will have larger spreads.

Comments are closed.