Bid rate and Ask rate

Bid rate and Ask rate:

Bid Rate: The price a buyer is willing to pay for security or currency. It’s the highest price at which they prepared to purchase. Typically, lower than the asking rate and represents demand.

Ask Rate: The price a seller is willing to accept for a security or currency. It’s the lowest price at which they are prepared to sell. Typically, higher than the bid rate and represents supply.

Feature	Bid Rate	Ask Rate
Market Role	Represents the highest price a buyer is willing to pay	Represents the lowest price a seller is willing to accept
Participant’s perspective	From the buyer’s perspective: The price they are willing to pay.	From the seller’s perspective: The price they are willing to accept.
Price level	Generally lower than the ask rate	Generally higher than the bid rate
Profit margin	Used to calculate the buyer’s potential profit	Used to calculate the seller’s potential profit
Order Execution	Orders are executed at the bid rate when a seller agrees to sell at this price.	Orders are executed at the ask rate when a buyer agrees to buy at this price.
Transaction examples	If an investor wants to sell a stock immediately, they will sell it at the bid rate quoted by the market maker.	If an investor wants to buy a stock immediately, they will buy it at the ask rate quoted by the market maker.
Bid-Ask Spread	The difference between the bid rate and the ask rate is known as the bid-ask spread.	The spread is key indicator of market liquidity and transaction costs.
Impact of high liquidity	High liquidity typically leads to a smaller bid-ask spread, indicating tight competition among buyers.	High liquidity typically leads to a smaller bid-ask spread, indicting tight competition among sellers.