If you’re going to buy and sell shares, you need to know how the pricing works…

Julie Brownlee, Fsp Invest, 12 Mar. 2015

Tags: share price, shares, price of shares, bid price, offer price, spread, bid offer spread, mid-price, investing,



There isn’t just one share price for a share. If you’re buying a share, there’s one price and if you’re selling a share, there’s another price.

These two different prices are the bid and the offer. And the bit in between these two prices is the spread.

So how does this all work?

Read on to find out…



The difference between the bid price and the offer price


If you phone your stock broker up and ask for a share price, he’ll give you two prices. This may seem confusing at first, but this is because there’s one price for selling at and one price for buying at.

Let’s say you call your broker and ask him what Company ABC is trading at. He quotes you 1,000c to 1,010c.

The lower of these two prices is the bid price. This is the price you’d pay to sell shares. Think of the bid price as what you have to bid for your shares. In our example above, this is 1,000c.

The higher of these two prices is the offer price. This is the price you’d pay to buy shares. Think of the offer price as what you have to offer to buy them. In our example above, this is 1,010c


How the spread works


The difference between these two prices is the bid offer spread. So in our example above, this is 10c.

On some websites, you may also see the mid-price quoted for shares. This is the price halfway between the bid price and the offer price. So for our example, this would be 1,005c.

You can’t trade at the mid-price, this is just a guide as to where the share price is currently sitting.

So there you have it. How the pricing works if you’re going to buy and sell shares.

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