The Bid, the Ask and the Spread
The gap between the buying price and the selling price quietly costs you money.
The idea
When you trade a stock there are really two prices at the same time. The bid is the highest price a buyer will pay right now, and the ask is the lowest price a seller will accept right now. The gap between them is called the spread. Because you normally buy at the ask and sell at the bid, that little gap is a cost you pay without ever getting a bill for it. 🪙
Words to know
- bid
- The highest price a buyer is willing to pay right now.
- ask
- The lowest price a seller is willing to take right now.
- spread
- The gap between the bid price and the ask price.
- market maker
- A firm that is always ready to buy or sell, and earns the spread for doing it.
- limit order
- An order where you name your own price instead of taking whatever is offered.
Try it — no account needed
True or false about the bid and the ask?
You usually buy at the ask price and sell at the bid price.
In the full lesson
- 1True or false
- 2Put it in order
- 3Make the call
Vine has 107 lessons like this one, each written three ways so a 7-year-old and a 17-year-old both get a version that fits.
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