| Stock trading is like thousands of transactions that | | | | offer or ask price. The offer side is where buyers |
| take place everyday in other venues just like the | | | | can purchase the stock at the current market price |
| stock market with one common denominator, a | | | | and are paying the top price for the stock at this |
| buyer and a seller. Stock trading is not unlike the retail | | | | given time during the trading day. However, if a seller |
| world, where supply and demand reflect the price of | | | | wishes to sell his stock at a higher price than what is |
| goods and services just like supply and demand | | | | currently showing on the bid side of the stock, the |
| determines the price of individual equities. Although | | | | trader can initiate an order and offer his stock on the |
| there is a similarity with the example of supply and | | | | ask or offer side and wait for buyers to pay the |
| demand, a stock may be bought or sold at different | | | | current market or best offered price for the equity. |
| prices. Retail goods are usually sold for a static price, | | | | With patience, traders can buy and sell stocks for |
| stocks however can be purchased at different prices | | | | lower than the current market price making more |
| with these prices reflected in the offer or ask price | | | | money than he would otherwise receive at the |
| and the bid price. | | | | prevailing prices. |
| For example, every stock has a current bid and | | | | It should be noted that stock prices do fluctuate |
| offer. The bid price is reflected on the left side of | | | | throughout the trading day as the ebb and flow of |
| the box and is usually what sellers can sell the stock | | | | supply and demand dictate in the financial markets. |
| for at the current market price. A seller can initiate a | | | | Liquidity is very important in order to purchase and |
| trade to sell their stock at the current bid price with | | | | sell stocks below the prevailing market price. Stocks |
| the sale almost always taking place immediately once | | | | that have very little liquidity do not lend themselves |
| the trade is initiated. A buyer can also use the bid | | | | to this practice since it is difficult for buyers and |
| side to buy stock at a lower price than what is | | | | sellers to name their own price in illiquid stocks. The |
| currently being displayed on the offer or right side of | | | | practice of buying and selling below the current |
| the box. If a trader does not want to pay the offer | | | | market price is usually the realm of the scalper who |
| price that buyers are willing to sell their stock for, he | | | | takes small profits in many transactions throughout |
| can place a stock trade and bid for the stock on the | | | | the trading day and the day trader who may buy |
| left side of the stock at a lower price than what is | | | | and sell just a few times during the day. However, |
| being offered on the ask or offer side. | | | | this trading strategy is not only for these two types |
| Usually if the stock is liquid, a seller will eventually sell | | | | of traders, the swing trader and long term investor |
| to the bidder at the price the trader has placed on | | | | can also profit from buying and selling below the |
| the bid side to buy the stock. | | | | current bid and offer price if patience is exercised. |
| The same works for the right side of the box, the | | | | |