Bid Price
What is Bid Price?
Bid Price is the maximum price a buyer (bidder) is prepared to pay for a security, asset, or commodity at a particular moment. It is half of a financial quote — the other half being the Ask Price, which is the minimum price a seller will accept.
Simply put, Bid Price = Buyer's Offer Price
How it Works?
In financial markets like stock exchanges, buyers and sellers submit bids and offers:
- A buyer places a bid — the price they want to pay.
- A seller sets an ask price — what they want to receive.
The transaction occurs only when the bid and ask match.
For example:
- Buyer’s bid: ₹95
- Seller’s ask: ₹100
Since they don’t match, the trade won’t happen until one side adjusts.
Where You’ll See It?
Stock Market
Investors are shown bid prices when they want to sell shares — it indicates how much buyers are willing to pay.
Forex (Currency Markets)
The bid price is what you'll receive if you sell one currency for another.
Bond Market
Institutional investors bid for bonds in auctions or over-the-counter transactions.
Commodity Markets
Bidding occurs for items such as gold, oil, or agricultural commodities.
Bid Price vs Ask Price
| Term | Meaning | Role |
|---|---|---|
| Bid Price | Highest price a buyer is willing to pay | What sellers receive |
| Ask Price | Lowest price a seller is willing to accept | What buyers pay |
The difference between the bid and ask price is called the Bid-Ask Spread. A narrow spread means high liquidity; a wide spread means lower liquidity or higher risk.
Example
Let's say a stock is trading with the following quote:
- Bid: ₹200
- Ask: ₹202
This indicates:
- Buyers are willing to pay ₹200 per share.
- Sellers are looking for at least ₹202.
- If you need to sell right away, you'd receive ₹200.
Why Bid Price Matters?
- Assists Sellers: It indicates the maximum price they can receive right away.
- Impacts Liquidity: Increased bid activity indicates increased interest in purchasing the asset.
- Price Discovery: It is a key factor in establishing the fair market value of an asset.
- Trader Decisions: Assists traders in determining the timing and price of trades.