what is bid and ask 
bid and ask also known as bid and offer is a two way price quotation representing the highest price a buyer will pay for a security and the lowest price a seller will take for it the difference between bid and ask prices or the spread is a key indicator of the liquidity of the asset in general the smaller the spread the better the liquidity the bid price the price a buyer is willing to pay is the first price in the pair the ask price or the price a seller is willing to accept is the second investopedia laura porterunderstanding bid and askthe average investor contends with the bid and ask spread as an implied cost of trading most investors and retail traders are market takers meaning that they usually will have to sell on the bid where someone else is willing to buy and buy at the offer where someone else is willing to sell for example if the current price quotation for the stock of abc corp is 10 50 10 55 investor x who is looking to buy abc at the current market price would pay 10 55 while investor y who wishes to sell abc shares at the current market price would receive 10 50 who benefits from the bid ask spread the bid ask spread works to the advantage of the market maker continuing with the above example a market maker quoting a price of 10 50 10 55 for abc stock indicates a willingness to buy abc at 10 50 the bid price and sell it at 10 55 the asked price the spread represents the market maker s profit bid ask spreads can vary widely depending on the security and the market blue chip companies that constitute the dow jones industrial average may have a bid ask spread of only a few cents while a small cap stock that trades less than 10 000 shares a day may have a bid ask spread of 0 50 or more the bid ask spread can widen dramatically during periods of illiquidity or market turmoil since traders will not be willing to pay a price beyond a certain threshold and sellers may not be willing to accept prices below a certain level 