how are the bid and ask prices determined 
bid and ask prices are set by the market in particular they are set by the buying and selling decisions of the people and institutions investing in that security if demand outstrips supply then the bid and ask prices will gradually shift upwards conversely if supply outstrips demand bid and ask prices will drift downwards the spread between the bid and ask prices is determined by the overall level of trading activity in the security with higher activity leading to narrow bid ask spreads and lower activity creating wide spreads the bottom linemost quotes in securities markets are two sided meaning they come with both a bid and an ask the bid is the highest price at which someone is willing to buy the security the ask or offer is the lowest price at which someone is willing to sell it together the bid and ask make up the price quote with the distance between the bid ask spread is an indicator of a security s liquidity the tighter the spread the more liquid quotes will often also show the number available at both the current best bid and ask prices most retail traders and investors must sell on the bid or buy on the offer while market makers set the bid and offer prices where they are willing to buy and sell 