What Is A Bid Price?
A bid price is the value buyers offer for an asset, such as a commodity, security, or cryptocurrency. Regardless of any market in the world, the term bid price is quite common across all types and is frequently used among the ones who does trading and buyers that are eyeing any particular asset. The security that someone is willing to pay for an asset is referred to as the ‘bid price’ of that specific asset. This value is not associated with the offered price; however, bids are usually considered to be of a lower value as compared to the suggested price. Realizing what offered price is, it is the seller’s asking price of the certain asset being provided in the market.
Bid bids in the market are generally based on ensuring the security of the crypto assets put to selling. To reach a bid price, the parties involved in the process come through a series of negotiations accompanied by a change in the price rates at all times. To clarify, a bid price does not require an asking price to exist in the market. If the seller is looking for a buyer without putting up an asking price, they will directly put up the bid price that has been decided upon across the order book.
Understanding the Mechanisms of Bid Prices in the Market
As stated before, the bid prices refer to the security that a buyer is willing to pay over an asset. While contrasted with the selling price, the difference across these two limits is referred to as the spread. A more extensive spread is equivalent to a more significant profit off a good. Bids are always believed to help buyers and sellers reach a middle ground of the price the parties are willing to obtain from the sell-out. The bidding across any asset can revamp into a bidding war if multiple parties bid for a certain asset. The person with the highest bid is considered catered to in the market.
Specifying Orders as Bid Prices
While discussing the market context, if a user intends to buy an asset at a defined price, the current bid price will be put up across the market order. In contrast, if the buyer wants to obtain a specific asset at a specified bid price in the market, they shall put up a limit order which will be executed whenever the price fills at that specified point. Such orders are common in cases involving the stock or cryptocurrency market.
Along with setting up the bid prices, the users also define the bid size under a set bid price, which refers to the shares the buyer is willing to purchase in the current order. The bid price of any asset is ascertained according to the bid size of the asset that the buyer is eyeing.
For the knowledge of buyers, any bid that is put across a digital asset that the seller has not been actively selling in the market is referred to as an unsolicited bid.
The mechanism of the cryptocurrency market completely aligns with that of the other market in terms of the consistency of covering orders according to set bid prices by the buyers.
Examples Bid Stocks Price
Let’s take a couple of examples for stock bid prices.
Example 1: (Bid price example in Bear Market Scenario) Suppose Tesla stock is trading at $100 with an offer price of $110 and a bid price of $90. Your gut feeling says that the price will fall soon so you open a CFD to short or sell 10 contracts at the bid price of $90. Within a few days, the price of Tesla’s share falls and starts trading at $60, with a stock bid price of $55 and an offer of $65. In this type of situation, your decision will yield a profit and you will be able to close your position by reversing the trade and buying 10 contracts at the new offer price.
Example 2: (Bid price example in Bull Market Scenario) Suppose you want to buy a stock of Samsung for $30 per share but the price is $35, and it is reducing to $32. The asking price is 32-33 dollars thus you will have to revise the rate to $32. In the meanwhile, if the price increases due to an increase in demand, you will have to place a bid higher than your last stock bid price.