What Is “Bid and Ask” in Forex, Stock, and Other Markets?

In any financial market, prices are not single numbers—they come in pairs: the bid and the ask (also called the offer). These two prices represent the two sides of every trade: someone willing to buy and someone willing to sell. The difference between them is the spread, which is the primary cost of trading in most markets.

Understanding bid and ask is fundamental because they show the real-time supply and demand dynamics and determine the exact price at which you can enter or exit a position. This article is not financial advice or trade advice, only an explanation.

Basic Definitions

Bid: The highest price a buyer is currently willing to pay for an asset. If you want to sell immediately, you sell at the bid price.
Ask (or Offer): The lowest price a seller is currently willing to accept. If you want to buy immediately, you buy at the ask price.

The spread = Ask – Bid. A tight spread means high liquidity; a wide spread means lower liquidity or higher risk.

Bid and Ask in the Forex Market

Forex is a decentralized over-the-counter (OTC) market with no single exchange. Prices are provided by liquidity providers (banks, brokers, ECNs).

Example: EUR/USD quote: Bid 1.0850 / Ask 1.0852
Sell 1 euro for 1.0850 USD (bid).
Buy 1 euro for 1.0852 USD (ask).
Spread: 0.0002 or 2 pips (common for majors).
Characteristics:
Extremely tight spreads on major pairs (0.1–1 pip during liquid hours).
Spreads widen during low-liquidity times (weekends, holidays) or news events.
Exotic pairs have much wider spreads (20–100+ pips).

Forex quotes are always shown as bid/ask because there is no central order book visible to retail traders—your broker aggregates quotes from providers.

Bid and Ask in the Stock Market

Stocks trade on centralized exchanges (NYSE, NASDAQ) with public order books.

Example: Apple (AAPL) quote: Bid $225.50 / Ask $225.55
Sell shares immediately at $225.50 (highest bid).
Buy shares immediately at $225.55 (lowest ask).
Spread: $0.05.
Characteristics (Generally):
Large-cap stocks: Very tight spreads (pennies).
Small-cap or low-volume stocks: Wider spreads (dollars or percentages).
After-hours/pre-market: Much wider spreads due to lower participation.
Level 2 quotes show depth (multiple bid/ask levels).

The spread reflects market maker profits and liquidity. In highly liquid stocks, high-frequency traders narrow spreads to fractions of a cent.

Bid and Ask in Other Markets

Futures and Commodities

Traded on exchanges like CME or ICE, with centralized order books.

Example: Crude Oil futures: Bid $72.45 / Ask $72.47
Spread measured in ticks (minimum price increment).
Front-month contracts: Tight spreads.
Distant months or niche commodities: Wider spreads.

Options

Each option contract has its own bid/ask.

Wider spreads than underlying stocks due to lower volume.
Implied volatility affects spread width.

Cryptocurrencies

Similar to forex—decentralized across exchanges.

Example: BTC/USD on a major exchange: Bid $95,200 / Ask $95,250
Spreads vary by exchange liquidity and coin popularity.
High-volume pairs (BTC/USDT): Tight spreads.
Altcoins: Very wide spreads.

Bonds

Primarily OTC.

Corporate/Treasury bonds quoted with bid/ask yields or prices.
Highly liquid Treasuries: Tight spreads.
Corporate or municipal bonds: Wider spreads, especially less-traded issues.

Why the Bid/Ask Spread Exists

Market Maker Profit: Dealers buy at bid, sell at ask, pocketing the spread.
Liquidity Risk: Wider spreads compensate for holding inventory in volatile or illiquid assets.
Transaction Costs: Covers order processing and exchange fees.
Information Asymmetry: Wider in assets where news can move prices quickly.

Key Takeaways

In the market generally, You sell at the bid, buy at the ask—always crossing the spread.
Tight spreads = high liquidity, low cost.
Wide spreads = higher cost, potential slippage.
The midpoint (bid + ask)/2 is often used as the “fair” reference price.

Bid and ask are the basic mechanism by which markets match buyers and sellers in real time. They exist in every traded asset class—from trillion-dollar forex pairs to individual stocks and commodities—reflecting liquidity, risk, and participant willingness at any moment. Understanding them clarifies how markets actually function beyond headline prices.