Are you thinking of dealing on the stock exchange? Here are a few questions to see how well equipped you are to take the step. Are you familiar with the routine of buying and selling shares? Ever come across terms like “offer”, “bid”, “ask” or “broker”?
If your knowledge about these terms and proceedings is nil, you’ve got some learning to do. It’s imperative and advantageous to study the details of the stock market before you take the plunge!
What’s bid price?
We often hear the term “bid” in auctions. Here, prospective buyers come to the auction venue and “bid” for a particular commodity. Once the auction begins, they propose the price they’re willing to pay for the commodity to the auctioneer. This process is called “bidding,” with each buyer offering his / her bid price. Typically, in an auction, the commodity is sold to the buyer offering the highest price (or highest bid), provided it’s above the reserve price. This completes the deal.
Bid price in a stock market
The scene in a stock market is akin to the one you would encounter in any other market. But here you’ve got prospective buyers coming to the market to purchase a certain quantity of stock. Each prospective buyer offers a price at which s/he’s comfortable buying the given quantity of stock. The price offered reflects his / her sentiment in relation to the stock desired. As such, every prospective buyer will have different prices to offer for the same stock. The “highest offer” that any investor is willing to pay for a certain quantity of stock is called the “bid price.”
The prices an investor offers or bids are based on several factors. The bid price is often backed by
Case study of the stock.
Study of trends in the industry.
Study of the prospectus.
Study of the financial statements and other reports to understand the financial condition of the organization.
Future strategies and policies of the company, etc.
Contrary to the bid price is “ask price”. This is the lowest price at which stockowners are prepared to sell their stocks. As an investor, it’s important to track the bid and ask prices of a stock. This is easy! The bid price and ask price for a stock are quoted on the stock exchange on which the stocks are traded.
How do you decide your bid price? Do you have any handy tips for first time investors? Tell us how a bid price decision has impacted your investments.
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