The bid and ask are two distinct prices quoted simultaneously for every stock — understanding both, not just the last traded price, matters for what you'll actually pay or receive.
The Definitions
The bid is the highest price a buyer is currently willing to pay. The ask (or offer) is the lowest price a seller is currently willing to accept. The gap between them — the bid-ask spread — is a built-in transaction cost, even when your broker charges $0 commission. A market order to buy executes at the current ask; a market order to sell executes at the current bid — meaning you never actually transact at the "last price" quote you may have been watching.
Worth knowing: A wider bid-ask spread on a thinly-traded stock means a market order can cost you meaningfully more than expected — placing a limit order at a price between the bid and ask often gets filled while saving on that spread cost, compared to crossing the full spread with a market order.
Someone Trading a Thinly-Traded Stock: Check the bid-ask spread before using a market order — it may be wider than expected.
Someone Trading a High-Volume, Liquid Stock: The spread is typically a penny or two — market orders carry minimal cost here.
Use Bid and Ask the Way
- Check the spread before placing a market order on a thinly-traded stock.
- Consider a limit order between bid and ask to save on the spread cost.
- Understand you transact at bid or ask, never the last-traded price alone.
See what is an order book for the fuller mechanics behind these quotes.
