Bid Price and Ask Price

In the trade market, we often see bid price and ask price, which detail to describe the gold price (also stock, forex etc). Well, what is the meaning of bid and ask price? If you understand the two price, it will help you know more about the trade market. In the fact, the bid price stands in contrast to the ask price or "offer".

What is the Bid price?

The "bid" is the current highest price at which you could sell. In the other word, if you want to sell your gold, in generally, you can sell it closest to the bid price but not the bid price.

What is the Ask price?

The ask is opposite of the bid. The "ask" is the current lowest price at which you could buy. As a rule, you buy it often higher than the ask price.

After realize the two terms, we should know another term "bid-ask spread". The difference between the bid price and the ask price is called the "bid-ask spread". If you would like to sell gold, a broker will offer to buy it for the bid price. And if you would like to buy it, the broker will offer to sell it to you for the ask price. The spread is the broker's profit. The ask price is always higher than the bid price, because nobody would like to lose money in business.

Take gold price for example, the bid $1583.00, the ask $1586.00. The spread for gold is (1586.00 - 1583.00 =3.00). The broker keeps the $3.00 /oz traded. Assume that gold trade 200 ozs today, and the average spread is $3.00. The broker gets a profit of 200 ozs * $3.00 = $600.

Don't forget, the most important of bid and ask price is that buyers pay the ask price and sellers receive the bid price.