If you have just entered the stock trading industry, you might be confused by the terms Bid and Offer that appear in every trading system. I see many beginners who do not understand what offer means and why the prices they pay are always higher than the prices seen on the screen.

Let's start with the basics: Bid is the buying offer price, which is the highest price a buyer is willing to pay for a security. Offer is the selling offer price, or the lowest amount a seller is willing to accept for selling that security. Most importantly, the Offer is always higher than the Bid. The difference between these two prices is called the Spread.

Why is this the case? Because the stock market is a negotiation between buyers and sellers. Buyers want to buy at the lowest price, sellers want to sell at the highest price. When demand exceeds supply, both Bid and Offer will move upward. When supply exceeds demand, both prices will decrease.

There is a technique I regularly use to read Bids and Offers: if the Bid and Offer are narrow, it indicates a trend but not enough trading volume yet. If the Bid is narrow but the Offer is wide, it suggests that large investors are preparing. If the Bid is wide and the Offer is narrow, it often occurs at the end of a trend. And if both Bid and Offer are wide simultaneously, it indicates very high trading volume.

Let's consider a real example: Somsak wants to buy 10 shares of Company A. The current price seen is $173 per share. He thinks he will pay only $1,730. But when he places the order, the system says he must pay $1,731, an increase of $1. Why? Because the $173 price he sees is the Bid price, while the Offer is at $173.10. When buying, he must pay according to the Offer, not the Bid.

Another important point is the Spread. Often, a narrow Spread indicates good liquidity, such as large-cap stocks with high trading volume. If the Spread is wide, it may mean the security has low liquidity, such as small-cap stocks or certain bonds. In this case, it’s harder to make a profit because you have to buy at a high price and sell at a low price.

Understanding Bid, Offer, and Spread helps you make better trading decisions, whether you use a Market Order that executes immediately, a Limit Order waiting for your desired price, or a Stop Loss to protect against risks. All of these depend on correctly reading the Bid and Offer.

Different securities will have different Bid and Offer prices. Large-cap stocks may have no Spread at all because of abundant supply and demand. Small-cap stocks or low-liquidity assets will have a noticeable Spread, sometimes expressed as a percentage of the asset’s price.

Finally, if you want to succeed in investing in the stock market, you need to spend time studying and truly understanding the market. Bid and Offer are just part of it, but they are very important because they tell you how the market is moving and what big players are doing.