how a bid works
buyers and sellers keep the market going each participant facilitates the purchase and sale of assets sellers are entities that provide assets for purchase buyers are those who want to purchase goods or services these two parties normally come together at different venues to conduct their business including auctions live and online the stock market and retail outlets the bid process depends on the market through which these goods and services are sold for instance bids that are made at an auction may be made in person or online while investors may make bids through their brokers for securities like stocks some bids take place in secret usually through a sealed process this process allows for fair and conflict free bidding in some cases companies may make bids in order to win contracts for jobs the bidding process involves sending out packages to interested parties 1 these contracts may be issued by governments or large corporations for infrastructure construction and other projects in a variety of different industries such as 2inside the spreadthe spread between the bid and the ask is a reliable indicator of supply and demand for a particular financial instrument put simply the greater interest on the part of the investor the narrower the spread in stock trading the spread constantly varies as buyers and sellers match electronically where the size of the spread in dollars and cents reflects the price of the stock being traded for example a spread of 25 cents on a price of 10 equals 2 5 but the spread shrinks to only 0 25 if the stock price jumps to 100 in foreign exchange the standard bid ask spread in eur usd interbank quotes is between two and four pips the price move in a given exchange depending on both the amount being traded and the time of the day in which the trade occurs spreads are typically narrowest during the morning in new york when the european market is simultaneously open for business for example a bid of 1 1015 is typically accompanied by an ask of between 1 1017 and 1 019 a standard usd jpy bid ask spread is 106 18 to 106 20 currency pairs that are less actively traded tend to have wider spreads many buyers make bids to procure the goods and services they seek these may include securities stocks bonds and other types of investments commodities currencies or any other assets the bid is the price of a stock for a buyer while the ask represents the price a seller is willing to accept on the trade the mathematical difference between the bid and the ask is known as the spread 3