Basics
In one sentence
The bid is the highest price a buyer will pay right now; the ask (or offer) is the lowest price a seller will accept. You sell at the bid and buy at the ask.
Because you always transact on the less favourable side, every position starts marginally negative. That gap is the spread, and it is the reason a trade that goes nowhere still loses a little money.
Charts usually plot the bid, which is why a long position shows a small loss the moment it opens even with no movement.
The mistake it causes: placing a stop exactly at a level and being filled early because the ask touched it while the bid, which you were watching, did not.
The bid is the highest price a buyer will currently pay. The ask is the lowest price a seller will currently accept. You sell at the bid and buy at the ask, which means you always transact on the less favourable side and every position opens slightly negative.
| Quote | You buy at | You sell at | Immediate cost |
|---|---|---|---|
| 1.0850 / 1.0851 | 1.0851 | 1.0850 | 1 pip |
| BTC 84,000 / 84,012 | 84,012 | 84,000 | $12 |
This is why a long position often shows a small loss the moment it opens even with no movement: you bought at the ask, and the chart is drawing the bid. It is also why a sell stop can trigger on a candle that, on the chart, appears not to have reached your level. The ask touched it; the bid you were watching did not.
It widens when liquidity thins: session rollover, news releases, weekends in crypto, and permanently on exotic instruments. A level placed with no allowance for a widening quote will be reached during the one minute of the day when the quote is widest. See spread.
This term is explained in context in the primer .
More in Basics: Leverage, Margin, Liquidity, Market order.
Education only, not financial advice. Trading is high risk and most retail accounts lose money.
