Stock market me trading karna matlab stock ke demand aur supply par nazar rakhna and trading decisions lena. Kab shares bechne ya khareedne hain ye market ki movements par hi depend karta hai. You need to have a keen eye, in-depth knowledge about trading strategies and concepts and a lot of research!
One such nugget of information you should know before executing a trade is called the bid-ask spread. It is also an essential indicator of the demand and supply for a particular stock in the market.
I know it sounds quite complex and intimidating. Toh aaaj hum iss concept ke simple words me explain karte hain. Let us break it down word by word.
Sabse pehle dekhte hain ke bid ya bid price kya hota hai. Bid price refers to the highest price that a buyer is willing to pay to purchase a particular share in the stock market. Agar ek company ke shares khareedne ke liye kayi buyers ya traders line me lage hote hain, to un sabhi ka diya gaya maximum price is the bid price
Agar aap stock market me trade karna chahte hain, then you can look at the bid price of any of the listed stocks on your trading platform. Aapko usually apne bids par live updates aur data aapka broking partner deta hai. Your broking partner in turn gets the data from the stock exchanges.
Traders ko price movement ka thoda sa andazaa dene ke liye trading platforms par top 5 bids display kiye jaate hai instead of showing only the highest bid price.
This was all about bid price. Ab jaante hain ke ask ya ask price kya hota hai?
Ask or ask price is the opposite of the bid price. So simply, ask price refers to the lowest price at which the seller is willing to sell a particular share in the stock market. Iska matlab ye hua ke agar bahut saare sellers ek company ke shares bechne ke liye ready hain, toh un sabhi sellers me se jo bhi sabse kam price quote karega, voh price ask price ban jayega.
Bid price ki tarah hi aap apne trading platform par hi ask price bhi dekh sakte hain. Jab aap ask price aur bid price ke ek saath study karenge tab you will get a better idea of market depth. Stock market me kisi bhi trade ka order tabhi execute kiya jaata hai jab ask price ya bid price se order ka price match hota hai
Now that we know what ask price and bid price are, let us understand the concept of bid-ask spread. In very simple terms, the bid-ask spread is the difference between the ask price and the bid price of a particular stock. Isse hum sirf spread bhi keh sakte hain. Let us explain the concept with an example. Agar ek stock ka bid price exchange par Rs 40 quote kiya jaata hai aur uska ask price Rs 42 hai, then the bid-ask spread, or simply the spread is Rs 2.
Bid prices demand ko represent karte hain aur ask prices supply ko. Dono milkar bid-ask spread ka concept banate hain, so from that it follows that the spread is a good indicator of the market’s demand and supply forces. Ek particular stock ke demand aur supply me kitna change aaaya hai, that can be easily gauged from the change in the bid-ask spread of that stock.
In fact, bid-ask spread ka traders ke liye ek aur use hota hai. That is to measure the liquidity of a stock. Ab ye kaise kiya jaata hai? Agar bid-ask spread ka price kaafi wide rehta hai, then the stock is less liquid. Doosri taraf agar bid-ask spread narrow hai, iska matlab hai ke stock is highly liquid. Jo example humne liya tha uske spread was only Rs 2, so the stock would be considered highly liquid.
In real life examples, you will notice that the spread of blue-chip companies or large-cap companies will be narrow. Why? Because a narrow bid-ask spread would mean high liquidity levels for the stock. The spread of small-cap companies, on the other hand, would be very large. That would indicate that they are illiquid.
You will also notice that in the foreign exchange or forex markets and the currency markets, the bid-ask spread will be very remarkably narrow. In fact, you will see that the bid-ask spread in the currency market will be 1/100th of a per cent.
This is because currency exchange is such an activity that the currency as an asset becomes highly liquid in nature.
Now you know a lot about bid-ask spread, at least enough to understand how to read these figures when you go ahead with your trades.
Aap bid-ask se related information ko apni trading strategy ke saath combine karke stock ke price movements ko behtar samajh sakte hain. As a result of this, you will be able to reap better returns on the spread. How? Jab aap stock ke price movements ko study karenge aur use bid-ask spread ke saath dekhenge, toh aapko better idea rahega about which order is better: a limit order or a market order.
This can help you in making your trades profitable.
Happy trading as an informed trader!