This is a perfect example of the CRAP that people on this site are getting sick of.
If you can't post something useful, then don't post.
Pls Explain: 'Buy At the Bid' - 'Sell At the Ask'
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This is a perfect example of the CRAP that people on this site are getting sick of.
If you can't post something useful, then don't post.
Also, when you are buying at the bid, you are a much less aggressive buyer than one who is buying or "lifting" the offer. There is a chance that the market may not come in to your bidding price and will move up before you can establish a long position.
It is certainly a tradeoff, one that traders make every day, and sometimes every trade, depending on which is more important to that particular trade: the price or the entry.
If you are scalping the spread, then clearly the price is most important, but if you are trading for a larger move, being in the trade is likely more important that the 2 or 5 cents (or 1 or 2 ticks) that you paid up to be long.
Another risk of "bidding" (buying at the bid) instead of "taking" or "lifting" (buying at the ask) is that you will only get an execution when you shouldn't want one - when the current trend is reversing and everyone suddenly wants to sell.
For a newbie that is trying to ride a trend, "taking" when buying or "hitting the bid" (selling at the bid) when selling is generally more appropriate.
For a newbie that is trying to ride a trend, "taking" when buying or "hitting the bid" (selling at the bid) when selling is generally more appropriate.
For a moment, stop thinking stocks and think selling your car...
Bid=wholesale price, ask= retail price...
Sell your car to the dealer, and you're selling at the bid price.
Put a "for sale" sign in your car window, put an ad in the paper or sell it on EBAY...your selling at an "ask" price.
i.e Chevy Chevettes are sold at the best bid, and Rolls Royce Sliver Seraphs are sold at the best ask.
If you want to buy Chevette's bid for them, if you want to buy Silver Seraph's take the offer.
Think cabbage, cars, baseball cards...and then use that thought process to trade stocks.
BUY LMT / BID= buy into weakness : passive
BUY MKT = buy into strength: active
SELL MKT = sell into weakness: active
SELL LMT/OFFER= sell into strength: passive
Selling your car through your means (for sale sign, ebay) is passive. Letting the dealer give you "his" bid price and taking it, is active.
I use car dealers, because this is PRECISELY how they make a living.
In order for a trade to take place a passive and active party are required. There are tons of stocks with wide spreads (Kenworth's as I call them, because you can drive one through them) with little volume. There is a "stalemate" between the active and passive side, and that's why the price stays the same. Everyone is passive, and the low volume indicates little to no interest. You can use passive orders to accumulate and distribute with more effectiveness by buying dips and selling rallies (in a uptrend of course), and the inverse less aggresively in a downtrend.
Buying into weakness and selling into strength may sound like oxymorons, but doing anything but is the difference between being a moron and trading with one.
DONT FORGET IT...hopefully I WONT SEE YOU ON THE OTHER SIDE.
Not exactly. A MM will always (or usually) be willing to take either side of the market freely. When I am in the pit, I might price an option like this: "1/4 bid at 3/4". This means that I am willing to either buy the option for 1/4 or sell it for 3/4. I do that all day, keeping my delta hedged with futures (or stock) and that spread is how I make my living. I am "offering" to sell at 3/4 or "bidding" to buy at 1/4. I am not the only person in the market, though. You may see my prices and match them, and maybe your broker is better than I am, and when a market order comes into the pit, he will be able to buy at 1/4 for you. Or maybe you will decide to "split the difference" and try and buy at 3/8 or 1/2, and maybe someone will sell to you at that price, doing better than my "offer" once they see your bid. As others have said here, it's like buying or selling anything else that requires negotiation, unless you want to pay the "asking price", buying from the offer and selling to the bid. Hope that helps!
Jessie
Jessie
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