Success Trading For New Traders - What Does Bid and Ask Mean?

Have you ever wondered what exactly is going on in the trading pits after you have sent to purchasing shares an order? You've undoubtedly seen online market quotations or even in the newspaper. Have you noticed that there are always two sets of prices given? What do these mean and where my order will get filled? Let's talk about the basics of the two prices you see.

Let's say you are trading stocks. The first prize (usually the one on the left) is a "bid". This is the price at which the market is offering to buy the shares. If you sell your stock on the market, this is the price you get. The second prize (usually on the right) is the "demand". This is the price at which the market will sell the stock. If you have an open to buy in the market to submit shares will get them for the asking price. Another element that comes into play sometimes the size of the bid and ask. Usually there is an order size that comes with the bid and ask. If this size is exceeded then the price will usually change - and, in general, will move slightly against you because you are creating a demand for that file small price change.

The difference between the bid price and the ask price is the "spread". If you look at the distribution of a large cap stocks that deals with one million shares per day, and compare that with a small cap stocks acting alone thousand shares per day, you can see see a big difference. Shares are more liquid (or more activity) will have much smaller spreads than those with less activity. Thus, you will get a more liquid. Better filling (or deal) for a stock market order A tool that you can use to possibly improve your price is to use. Limit orders If you want to buy more than $ 12 and the bid is $ 11.50 and the ask is $ 12.50, XYZ, you can place an order with a limit of $ 12. This means that the order is not completed, unless you can get it for $ 12 or better.

A word of caution with limit orders is that the market could walk away without you using a purchase order. And if your order is filled, you are buying the shares of a relapse, which means it could make a major step down. As a general rule, it is not a good idea to use in the sale of shares and the market could make without ever hitting your limit price and you would be stuck with a big loss. A great move against you limit orders

Chuck Cox is a technical writer and Industrial Scientist by professional with a background in statistics. He used mathematical and statistical methods to invest and trade in the stock, futures and options markets. Chuck has several companies owned and currently operates several websites. To investigate, visit his website, Stock Trading Reviews a new stock trading idea