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