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