| |
| |
|
|
|
|
|
Success Trading for New Traders: What Does Bid and Ask Mean?
Do you ever wonder exactly what's going on in the trading pits after you've sent an order to purchase stock? You've no doubt seen market quotes either online or even in the newspaper. Have you noticed that there are always two sets of prices given? What exactly do those mean and where will my order get filled? Let's discuss the basics of the two prices you see. Let's say you're trading stocks. The first price (usually the one on the left) is called a "bid". This is the price at which the market is offering to buy the stock. If you sell your stock at the market, this is the price that you'll get. The second price (usually located on the right) is called the "ask". This is the price at which the market will sell you the stock. If you submit an open order to buy shares at the market, you will get them for the ask price. Another element that comes into play sometimes is the size of the bid and ask. Usually, there's an order size that comes with the bid and ask. If that size is exceeded then the price will usually change - and generally, that small price change will move slightly against you since you're creating a demand for that stock. The difference between the bid price and the ask price is called the "spread". If you look at the spread of a large cap stock that trades over a million shares a day, and compare that to a small cap stock that only trades a thousand shares a day, you'll see a huge difference. Stocks that are more liquid (or more activity) will have much smaller spreads than those with less activity. Thus, you will get a better fill (or deal) for a market order on a more liquid stock. One tool you can use to possibly improve your price is to use limit orders. If you want to buy XYZ at no more than $12 and the bid is $11.50 and the ask is $12.50, you can place a purchase order with a limit of $12. This means that the order won't be filled unless you can get it for $12 or better. One word of caution with limit orders is that the market could run away without you if used with a buy order. And if your order is filled, you'll be buying the stock on a downtick, which means it could be making a major move down. As a general rule, it's not a good idea to use limit orders when selling stocks as the market could make a big move against you without ever hitting your limit price and you'd be stuck with a big loss. Chuck Cox is a Technical Writer and Industrial Scientist by professional with a background in statistics. He has used mathematical and statistical methods to invest and trade in the stock, futures, and options markets. Chuck has owned various businesses and presently operates several websites. To learn more about trading the markets, visit his website, http://www.earncashathometoday.com/trading-stocks.htm
MORE RESOURCES:
Investing - Google News |
|
|
|
RELATED ARTICLES
Issuing Warrants to Investors When raising capital for a business venture, warrants are a common form of equity that is given to investors. A warrant is like an option - it gives the holder the right to buy a security at a fixed or formulaic price, which is known as the "exercise" or "strike" price. Gold; What Type of Gold to Buy JewelryThe advantages are:? Gold Jewelry is the easiest of the gold to buy and has the enjoyment of being able to be worn.The disadvantages are:? Retail Jewelry is often marked up by 300% or more in the shops. Lobster Trapping for Investment Ideas Recently, my family and I took a trip to Maine to visit relatives. During our stay, we toured the rocky shore lines and took in the beautiful architecture of the old towns. It's Never too Early to Start Investing! Remember the old saying, "never too late to start"? Well, try this on for size: when it comes to investing, it's never too early to start. Time really is of the essence here. Poll Names Coin Laundries Best Investment For 2005 According to Morton Pollack, CEO of PWS, The Laundry Company and editor of the newsletter, "Historically, laundry owners have been a quiet group. Knowing they are onto a good thing, they've been pretty reticent. Quit and Retire Three Years Earlier! For most people, there is a direct correlation between how worried they are about retirement income, and how much they can actually do about it. This is because the more worried you are, the closer you probably are to retirement, and the less time you have to do anything - like save up. Investing As A Sport? I said last week that money doesn't generally buy happiness, but the lack of it can buy absolute misery. This, by the way, is not just my personal observation. Forex market offers opportunity and information The forex market is what is called an international exchange currency market, where currencies are exchanged on a daily basis. There are five forex market centers around the world - New York, London, Tokyo, Frankfurt and Zurich. Beginning Investor - Investment Terms Over the course of the past two months, readers have brought to my attention that there is a steep learning curve for investment terminology. That's why the focus of this month's Beginning Investor column will be investment terminology. Justify Social Security ... Dont Save for Retirement It is a common question when investors review their retirement plan-should we include social security benefits into our retirement income projections?It seems the closer an investor is to retirement, the more likely he/she will include social security benefits into the analysis. Younger investors, however, may feel compelled to omit such benefits. Realistic Investing Expectations Over the long term stocks have provided us with great average return results. But this average return masks a great deal of volatility, because returns have fluctuated within a very wide band. How Do I Start Investing Online and What Are Some Basic Tips? If you are new to investing online, don't put your entire life savings into an online account. Start with a smaller sum, which will be easier to handle and keep track of. Now is the Time to Invest for Your Retirement! Yes, it's the time we've all been waiting for?tax season! We know you've gotten a jump start and filed early this year, right? Of course not, but rather than dreading this part of the year, we should all look to it as a point for new opportunities. Many readers don't realize that even though the New Year has come, they can invest money as if it were still 2004! That's correct, it's not too late. Trading Expert Discovers Ways To Beat Stock Market Odds With Money Management The first point to mastering money management is that you have to understand when you're trading on the stock market is that you are playing the odds - but unlike many forms of gambling, you can make money. The key to making this money is to respect the risk that is part of the market, and manage it. Direcway & Wildblue Set to Square Off this Fall? There is a cat fight brewing between Direcway LLC, Starband and Wildblue Communications for the large number of people in the U.S. Brain Snappers and Other Wall Street Nonsense The last time you spoke with your broker did he use any of the following words? Diversification, Price-to-earnings ratios, discretionary trading, lifting a leg (he's talking to you not your dog), leverage, divergence, fee-based compensation, escalator clause, tactical asset allocation and other mesmerizing words to place you in stupefying shock.Brokers do that to let you know that you don't know anything about the market and you must allow them to make decisions for you. Introduction To FOREX The Foreign Exchange Market, better known as FOREX, is a worldwide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Angels, Are They Real? They're real, but few survive. High risk investing is dangerous to your bank balance. Forex Trading Best Practices FOREX, the term for the FOReign EXchange market, is an international exchange market where currencies from many different countries are bought and sold. Both long-term hedge investors and short-term investors that seek quick profits use FOREX. Economic Survival in the 21st Century - the Three Key Questions to Ask In this "special report", I want to pose a few important "philosophical questions" to my readers. Firstly -- our Federal Reserve Chairman, Alan Greenspan, addressed the effects and implications of our aging population on things such as Social Security again in a speech that he made last Friday.
|
