I just noticed that many people are asking about what bid means, so I think this topic is quite important for anyone who wants to trade stocks or invest in the stock market. I’d like to share our understanding.

Let's start with the basics: a bid is the highest price a buyer is willing to pay for a particular security, while an offer is the lowest price a seller is willing to accept. Both of these will change according to supply and demand in the market all the time. If demand exceeds supply, both prices will move upward; if supply exceeds demand, they will decrease accordingly.

Why should we care about bid and offer? Because it helps us understand what the market is doing. For example, if you see that the bid is narrow and the offer is narrow, it indicates a trend is forming but there’s still no volume. So, you need to see whether people are entering the trade or not. On the other hand, if the bid is narrow but the offer is wide, it could be a signal that large investors are waiting for the right moment.

The difference between bid and offer is called the spread. This margin is what brokers or transaction managers seek to profit from. The wider the spread, the harder it is to make a profit because you have to buy at a high price (offer) but sell at a lower price (bid).

A clear real-world case is if the current stock price is $173 and you buy 10 shares, you might pay $1,731 instead of $1,730. This difference is the spread, which arises because the last traded price is $173, but the offer price you pay is $173.10.

For sellers, the bid is the price you will receive, while buyers must pay the offer price. If multiple buyers bid higher, the highest bidder wins, which is advantageous for sellers because they get a better price.

Watching bid and offer is crucial, especially when investing in securities with low liquidity. Large-cap stocks may have a very narrow spread almost invisible, but small-cap stocks or certain bonds may have a noticeable spread as a percentage of the price.

In summary: bid is the buy price, offer is the sell price. The difference between them is the spread you pay. Understanding bid and offer well can help you trade more wisely and reduce trading costs significantly.