Bid / Ask Spread | Trading Terms

The difference between the buy and sell price (also known as bid and ask) is one of those things that mystifies newbies. We’re not used to having two prices for the same thing when we go to a store or shop online. This video explains in detail what they mean and why it’s there in the first place.

As there are many connected things stemming from the bid/ask price David covers them as well, to provide a more holistic description of the term.

The exact terminology, its place on a chart, how to interpret it is discussed in a simple and easy to grasp way before continuing to a bit more advanced things like liquidity and illiquid instruments, different types of spread. But everything is accompanied with real market examples and shows things exactly as you’ll find them in the Trading 212 platform whether on a laptop or in our trading app.

Still have questions? Comments are below, ask away.

At Trading 212 we provide an execution only service. This video should not be construed as investment advice. Investments can fall and rise. Capital at risk. CFDs are higher risk because of leverage.

[johnholme]

Chrystal clear, thank you. Yes the spread is the brokers commission. So generally speaking the spread correlates with the market volume, that is the greater the volume the narrower the spread and vice versa, the less the volume the greater the spread.

[royal.desert]

I have watched at least 5 videos trying to learn what Bid/Ask means and this is the first video that made me go "ohhh, so thats what it means and thats what I need to keep an eye out for" Thank you so much!!! Im from America and I love the accent!

[eliie]

You look like Michael from Grand Theft Auto 5

[Pete_YNWA]

Beautifully explained. shame you don't do any videos anymore

[gabrielayan]

The way you express your idea is clear and concise! Thank u so much

[johnny-S]

What is missing from the video is when to show the Bid or Ask price on a chart. As I realized (to my cost) that this makes a significant difference to where you place a Stop-Loss line on a chart.

[tamikabostic]

You explained this perfectly! Thank you. I look forward to watching more of your videos,

[bookworm]

You're talking about bid and ask offers, but on the trading 212 I'm not seeing any option to place a bid/ask offer. You can only buy at the current price, you cannot place any offers of your choice.

So how are these buy/sell prices computed then?

Are there any other brokers that allow you to bet like that? If so, is the bid/ask price that we're seeing on trading 212 just a mirror of the offers from other brokers?

[bal]

That couldnt have been explained better. Very helpfull, thanks

[FreePalestineOAllah]

I am not able to see bid and sell price on live Trade 212 on ISA Account.Could you please help to know how to see these prices next to each other on 212 platform. many thanks

[elio]

Hi David. Thanks for the video, very easy to follow. I have just started learning all of this and just confused about the buying and selling. I see the selling price is less than the buying price, which doesn't make sense to me unless I decide to buy and wait for the price to increase. And the selling is something else altogether. Hope I have made myself clear enough. thanks again.

[lancepheng]

why cant i drop a limit order on the chart and drag it around on the chart?

[MelroyvandenBerg]

I don't see 'zero spread' in my T212 listing :\?? No results found it says.??

[Jen]

so great thank you but I wanted to ask a question if the spread is really tight say 5 pips how do you actually make money of your buying higher and selling lower shouldnt that mean then you trading at a loss? Im new new to all this and find it a little puzzling. thank you

[queenace]

I totally understand how you explain that..

[TraderZer]

So the lower the spread the cheaper it is if you buy or sell?

[DrewKivsar]

I cant help but ask the question. A lot of companies are sharing trading ideas and that you only need to profit 50% of the time to profit with the right money management plan. Since there are only 2 ways the chart will go, would it be fair to say that you have a 50% chance of profiting from each trade no matter your strategy providing you stuck to your money management plan??

[trochetiaboutic]

Thank you David, well & clear explanation

[davidk]

Excellent explanation. Brilliant really. Thank you very much David. Job well done, as usual.

[Lorant]

Thanks for the explanation. Who profits from the "spread" though? Is it the trading platforms?