The bid is the amount that your broker is willing to pay in order to buy a financial instrument. It is the opposite of an ask, which is the price that a seller will take in order to part with a financial instrument.
Bids usually comprise two elements:
- The price which the buyer is willing to pay
- The quantity of the financial instrument they are looking to purchase.
A trade is executed when a matching bid and ask are combined.
For example, a trader bidding 110.25 for 1,000 units of USD/JPY will see their trade executed when a seller agrees to that price and level.
The bid (the price at which you can sell an asset) is quoted as lower than they ask, and the difference between the two is known as the spread.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.