bid price
The highest price a buyer is willing to pay for a security at a given moment.
Example
“The stock had a bid price of $49.95 and an ask price of $50.00 — a $0.05 bid-ask spread.”
Memory Tip
BID price = what buyers are willing to PAY. The 'buy' side of the market.
Why It Matters
Understanding bid price helps you make better trading decisions because it shows you the real price you can actually sell a security for right now, not some theoretical future price. This matters for your portfolio because the difference between bid and ask prices directly affects how much money you receive when you sell stocks or other investments.
Common Misconception
Many people think the bid price is what they will pay to buy a security, but it is actually the price that buyers are willing to pay to purchase from sellers. The price you pay to buy is the ask price, which is higher than the bid price, and this gap between them is called the spread.
In Practice
If you own 100 shares of a stock and check your trading app, you might see a bid price of 45.50 and an ask price of 45.65. If you decide to sell your shares immediately, you will receive 45.50 per share, giving you 4550 dollars total, not the 4565 dollars that someone buying at the ask price would pay.
Etymology
BID = an offer to buy at a certain PRICE. The buyer 'bids' for the security.
Common Misspellings
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Related Terms
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See Also
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