Listen to a Business English Dialogue About Bid and asked
Nova: Hi Maya, do you know about bid and asked prices in finance?
Maya: Hi Nova! Yes, the bid price is the highest price a buyer is willing to pay for a security, while the asked price is the lowest price a seller is willing to accept.
Nova: Right, the bid-ask spread is the difference between these two prices, representing the transaction cost for buying and selling securities.
Maya: Exactly. A narrower bid-ask spread indicates a more liquid market, while a wider spread suggests lower liquidity and potentially higher trading costs.
Nova: Yes, market makers play a crucial role in narrowing bid-ask spreads by facilitating trades and providing liquidity to the market.
Maya: Absolutely. They buy securities at the bid price and sell them at the asked price, profiting from the spread while ensuring smooth market functioning.
Nova: Right, investors often aim to minimize the impact of bid-ask spreads on their trades by placing limit orders and monitoring market depth.
Maya: Yes, limit orders allow investors to specify the maximum price they’re willing to pay when buying or the minimum price they’re willing to accept when selling.
Nova: Exactly. By using limit orders strategically, investors can avoid paying excessive transaction costs and improve their overall investment returns.
Maya: Absolutely. Understanding bid and asked prices and how they affect trading decisions is essential for investors navigating financial markets.
Nova: Yes, by being mindful of bid-ask spreads and employing appropriate trading strategies, investors can optimize their trading performance and achieve their financial objectives.
Maya: Right, staying informed and making informed decisions can help investors navigate the complexities of financial markets more effectively and achieve long-term success.