Bid–Ask Price
Definition
The bid–ask price refers to the two prices quoted for any tradable instrument: the bid (sell price) and the ask (buy price). The difference between them is the spread. Traders always buy at the ask and sell at the bid, meaning every trade starts with an implicit cost. How tightly and consistently a broker quotes bid–ask prices directly affects trading costs and execution quality.
In Plain English
In plain terms, the bid is the price you can sell at, and the ask is the price you can buy at. You will never buy at the bid or sell at the ask. The gap between these two prices is how brokers and markets are compensated for providing liquidity, and it is one of the most important everyday costs in trading.
How It Works
- For every instrument, the broker shows two prices at the same time.
- The bid price is what buyers in the market are willing to pay.
- The ask price is what sellers are willing to accept.
- When you place a buy order, it executes at the ask.
- When you place a sell order, it executes at the bid.
- The difference between bid and ask is the spread.
- Bid–ask prices update constantly as market conditions change.
- During low liquidity or high volatility, the gap between bid and ask often widens.
Why This Matters for Traders
Bid–ask pricing affects every trade, regardless of strategy or time horizon. Wider bid–ask gaps increase the distance a trade must move to become profitable. For frequent traders, even small differences compound quickly. For leveraged trades, the cost impact is magnified. Understanding bid–ask behaviour helps traders avoid unexpected costs, especially during volatile or illiquid periods.
Common Misunderstandings
- The mid-price is a tradable price: trades execute at bid or ask, not the midpoint.
- Tight spreads are guaranteed at all times: bid–ask gaps vary with conditions.
- Bid–ask pricing is controlled solely by the broker: underlying market liquidity drives it.
- Bid–ask only matters for entry: it affects exits, stop losses, and margin calculations.
- All brokers quote the same bid–ask prices: feeds, liquidity access, and markups differ.
How This Affects Broker Choice
Bid–ask behaviour is one of the clearest ways to compare brokers in practice. When evaluating platforms, users should assess:
• Typical bid–ask spreads during normal trading hours.
• How aggressively bid–ask prices widen during volatility or news.
• Whether pricing is consistent across platforms (web, mobile, desktop).
• Transparency around minimum vs average spreads.
• How bid–ask pricing interacts with stop losses and margin rules.
From a monetisation and comparison perspective, bid–ask pricing underpins cost comparisons and naturally leads users into broker reviews and spread-focused comparison pages.
Risks & Common Mistakes
• Entering trades during low-liquidity periods without accounting for wider bid–ask gaps.
• Placing stop losses too close to price, allowing bid–ask widening to trigger them.
• Comparing brokers using headline spreads instead of typical bid–ask behaviour.
• Ignoring how bid–ask pricing changes during rollovers or market opens.
• Choosing brokers that do not clearly disclose pricing methodology.
Risk note: sudden bid–ask widening can increase losses and accelerate margin pressure, particularly on leveraged positions.
Real-World Example
An instrument is quoted at 100.0 (bid) / 100.4 (ask).
• If you buy, you enter at 100.4.
• If you immediately sell, you exit at 100.0.
Even though the market price has not moved, the trade shows a loss due to the bid–ask gap. During volatile conditions, this gap may widen further, increasing the break-even distance.
What to Check Before Trading
- What are the typical bid–ask spreads for your instruments?
- Do spreads widen significantly during news or low-liquidity hours?
- Are bid–ask prices consistent across platforms?
- Does the broker publish average spread data?
- How does bid–ask pricing affect stop losses and margin?
- Are there additional markups on certain account types?
- Is pricing transparency supported by regulation?
Related Concepts
The spread is the direct result of the difference between bid and ask prices.
Liquidity determines how tight or wide bid–ask prices are.
Market orders execute at the current bid or ask price.
Stop losses can be triggered by bid–ask movements, not just mid-price changes.
Execution quality determines how reliably bid–ask prices are honoured.
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