I just realized that many people still don’t really understand bid and offer in the stock market. So I’d like to share my understanding of this, because it’s very important if you want to trade well.

In simple terms, the bid is the highest price buyers are willing to pay, and the offer is the lowest price sellers are willing to accept. The difference between the two is called the spread, and the spread is basically the profit for the broker or market maker.

What I’ve observed is that the bid and offer are not fixed at all—they change every second based on supply and demand. If more people want to buy, the bid price goes up. If more people want to sell, the offer price goes down. This is a key point to watch, because it reflects the real strength of the market.

When looking at bid and offer, there are some techniques. If the bid is narrow and the offer is narrow, it shows there is a trend but there isn’t much volume yet, because people haven’t really started to come in. If the bid is narrow and the offer is wide, it could be a sign that big sellers are waiting for the right moment. If the bid is wide and the offer is narrow, you often see this toward the end of a trend. And if both the bid and offer are wide, it indicates the highest volume.

Actually, bid and offer are very useful for trading. Especially when using limit orders or stop loss orders, you also need to look at the liquidity of the security. If the bid-ask spread is too wide, it’s difficult to make a profit, because you have to buy at a higher price and sell at a lower one.

For sellers, the bid price is the price you get when selling shares. For buyers, they have to pay the offer price. The difference is the cost you have to bear each time.

Try to imagine this: you want to buy Stock A at the current price of 173 dollars, but in reality the offer price might be 173.10 dollars, because the seller wants that price. This is the exact point that many beginners get confused about.

My advice is to understand bid and offer well. Usually, large stocks with lots of trading activity have very narrow spreads. But for small stocks or assets with low liquidity, the spread can be much wider and can eat into profits a lot.

So you should check the bid and offer every time before you trade, because they tell us how liquid the market is and what your actual trading costs really are. If you understand this, your trading will definitely become more disciplined.