What Is The Basic Difference Between Bid, Ask and Spreads? - YouTube

if you're a day trader you'll want to watch  this understanding the fundamentals of the  

bid and the ask spread is going to be  a key factor in your trading success  

every time that you enter a trade the bid  and the ask is going to play a role in that  

so have you ever wondered if you should buy  at the bid or the ask let's talk about it  

hey what's up youtube this is foxtail digital  coming to you again with black girl stocks and  

in this video we're going to be talking about the  bid and the ask spread so what is it and how can  

you use it to start building more successful  trading setups okay but first if this is your  

first time watching this video please make  sure that you click that thumbs up button it  

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you'll get notified any time i upload a new video  for you guys we talked about the bed and the ask  

a little bit on the channel uh but what is it  really when you really think about it the stock  

market is a huge collection of buyers and sellers  so at any given time a stock is being bought  

and sold when you want to buy something at  an auction what do you do you put in a bid  

for it so a bid for ownership and then when you're  selling something you're gonna ask for a potential  

buyer to bid to sell what you want so let's  put that into terms of the entire stock market  

when we have a bid and ask spread that represents  the difference in between the highest bid price of  

buyers and the lowest price of sellers everybody  wants the deal and this is what you're going to  

see when you're looking at the ask and the bid  spread so just remember this the bid is going to  

be the highest price that a trader is willing to  pay to get into a stock and then the ask is going  

to be the lowest price that a trader is willing  to sell their stock for right now the time being  

so for example let's say right now that  this stock has a bid ask of ten dollars and  

ten dollars and fifteen cents right now the  most that buyers are going to be willing to  

pay for that is gonna be ten dollars and the  least that somebody is willing to sell it out  

for is going to be ten dollars and fifteen cents  so if you were looking to get into that trade  

you're probably not going to get it less than ten  dollars and fifteen cents until a trade opens up  

available for that and on the opposite if you're  looking to sell it to somebody you're probably  

not going to get it for more than ten dollars  so the difference between the ask and the bed  

the spread is a huge huge indicator of liquidity  in a stock so every time when you hear me say  

get into a liquid stock get into a liquid  stock is it liquid is it liquid this is what  

we're talking about so when we say liquid that  means easy to get in and out of like a thought  

seriously have you ever been trying to get  into a trade but you just cannot seem to get in  

you keep increasing your bid price until finally  you get into the trade and usually it's going to  

be a little bit higher than you originally wanted  to but you really wanted to get into the trade  

and then it drops after that but that's enough  that's a whole another story think about it like  

this stocks that have a smaller or tighter bid  and ask spread are more liquid and easier to get  

into so you want a smaller spread a lot of really  good professional traders they keep their spread  

about five cents five to ten cents so if your bid  and your ask is more than 10 cents no ma'am large  

popular companies like google apple and netflix  they're usually going to have smaller spreads  

than stocks that really aren't as actively traded  um they're going to have wider spreads and they're  

going to be less liquid and more difficult to  secure the trade at the price that you want this  

is why this is key for day traders so remember  this also it's going to help to look at the  

differences between the bid and the ass and like  percentage-wise so try not to focus so so much on  

the actual scent because stocks that have a higher  price normally have a wider spread also but it's  

gonna have the same percentage if that makes sense  so for example think about a stock that's going  

for ten dollars right now and it has a ten cents  bid and ask spread so that's going to be a spread  

of one percent then look at a stock that's trading  at a thousand dollars with a one dollar spread the  

bid in the ask is wider than the previous but it's  actually only point one percent of the price so  

it's actually less so think about it like that uh  as far as percentages two when you're dealing with  

higher priced stocks one way that you can really  use this to your advantage is to think about it  

like supply and demand and you're going to be able  to find short-term trends in the stocks by looking  

at the spread volume so pay attention to the  volume all right so when you're looking at quotes  

see the number next to the bid and the ask price  that's going to be the current number of shares  

available at each of those prices so looking  right here for example we see a bid of 145 what  

is 145.06 the stock price that you see is 144.98  and you can use this to get an idea of the future  

direction of your stock trend looking at the bid  and the ask amount just remember this when the  

bid volume is higher than the ask volume then the  selling is going to be stronger and the price is  

more likely to go down but when the ask volume  is higher than the bid volume then the buying  

power is stronger in that situation and then the  price is more likely to go up so when you see more  

volume on either side use that to your advantage  to get into short-term price movements all right  

and the last question should you buy the bid or  the ass well let's look at level two data so right  

here i'm looking at apple we're on apple and this  is our level two data right here so we said before  

that the bid is the most that a buyer is willing  to pay and the ask is the lowest that a seller is  

willing to take so this list is going to show you  all of those orders and the sizes next to that is  

the number of shares available at those prices  these are all limit orders so these are limit  

orders obviously you want to get the better price  when you're trading so instead of just accepting  

the market price this is pretty much the best  that you're going to get but this is probably  

due to after hours trading because the stock has  gone up 10 cents so i'm actually filming this in  

after hours so kind of ignore this 144 price  right now because the stock has increased in  

after hours so that's what's going on with these  bid and ask right here but yeah as far as as  

a lot of people are going to try to buy their  stocks a little bit lower and they're going to  

want to sell them a little bit higher so do you  want to buy or sell at the ask a bit it really  

just depends on the numbers here so look here if  you want to buy a certain stock you can see what's  

being shown on the bid and how many orders need to  be filled to get to that best price so right here  

let's say if you wanted to get in right now the  best price that you can get in is probably going  

to be 145 18. there's five shares available for  that once that's gone it's going to move up to 145  

20. once uh once those five are gone it's gonna  move up to 145.25 and then after that see you  

see 100 is available now so once that 106 is gone  then it's gonna go up to uh 145.30 so i don't know  

if you guys are in weeble chat rooms but i know  a lot of people say don't buy the bid don't buy  

the bid buy the ask because when you buy the  ask that's what's going to help increase that  

stock price don't buy the bid if you want the  stock to go up buy the ass uh the same thing is  

if you're selling you're going to look over here  at the bid so what are people bidding to buy in  

the best price that you're going to get right  now is 145.01 um and this is this is what you  

call market debt so a level one screen is going  to show just the number of buyers and sellers with  

the open order at the price that you're looking  at but you really don't have a lot of information  

you know about how many other buyers and sellers  there are out there at different prices when you  

get into the level 2 screen now look at all  that when you get into the level two screen  

that's going to show you the number of buyers and  sellers at each price level when you add up those  

numbers of buyers and sellers then you'll be able  to kind of determine whether there's more pressure  

to buy or sell that stock and as you can see this  is going crazy right now it's going crazy the bid  

in the ask spread is basically just negotiation  so if you want to buy a share you're going to have  

to pay the ask price if you want to sell shares  quickly you're going to have to take the bid price  

i don't want to say to be successful but to get in  quickly you're going to have to be able to stand  

you know stand up for yourself walk away  from the trade if it's just going crazy  

all right so that was a little bit of information  about the bid and the ask i hope you guys enjoyed  

that video but make sure you check this video  out to get more information about when exactly

you should get into your trades the exact second  so check that video out it's pretty fire yeah