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The difference between the buy and sell price (also known as bid and ask) is one of those things that mystifies newbies. We’re not used to having two prices for the same thing when we go to a store or shop online. This video explains in detail what they mean and why it’s there in the first place.
As there are many connected things stemming from the bid/ask price David covers them as well, to provide a more holistic description of the term.
The exact terminology, its place on a chart, how to interpret it is discussed in a simple and easy to grasp way before continuing to a bit more advanced things like liquidity and illiquid instruments, different types of spread. But everything is accompanied with real market examples and shows things exactly as you’ll find them in the Trading 212 platform whether on a laptop or in our trading app.
Still have questions? Comments are below, ask away.
At Trading 212 we provide an execution only service. This video should not be construed as investment advice. Investments can fall and rise. Capital at risk. CFDs are higher risk because of leverage.
Like if hes know what he Talking about🔥
He know very much goodly what he talk about. he number 1 beau-coup talker
Hi David
Started trading few weeks ago on I phone , trying too work out how the % is calculated in the green box, the account value.
I understand the free funds + Marin part. But how is the % going up an down.
An one more question, what is a save range too keep that % at.
Enjoying all your videos
Thanks
Hi – if you mean your account value, that is going to fluctuate depending on your profit or loss on open positions.
Great video . Really helped
Where is that money going? If george sells to me for 0.99 but i paid 1.01 where is that 0.02 going?
Thanks I was looking for this answer, then if we sell we don’t have to pay spread or broker charge.
So you thought trading 212 is a charitable organisation? They get paid too… Hello!!!!
How can I use trading 212 it’s very hard
When I buy my shares then I see it go to profit i then proceed to sell it on your platform it loses money when I sell it click the sell button the one next to the buy so I don’t know anything
You can contact the customer care team for assistance in regards to Trading 212’s services – http://www.trading212.com/en/Contact.
T212 is very easy to use, almost like a game (not saying it’s easy to make money). I think you’re making two mistakes here:
1) You’re overlooking the fact that if your instrument is a *stock*, then you have to pay commission. €2 for opening the position, €2 for closing the position. So if you’re €3 in profit (Nice green number on screen.) and close the position, you still lose cash on the trade.
2) You said that you “sell” when the shares you bought gave you some profit. Instead, you should say that you close the position, which does indeed sell your (virtual) shares. But if you indeed *meant* “sell”, then you possibly just opened a second position of those stocks, this time betting on it to fall instead of rise, while your old in-profit position stayed open.
Hello.like the videos you post.Im from Namibia.can recommend any good broker with tighter spreads on fx pairs?
pls tell us more about GAP UP and GAP down and how to protect the loss due to GAP DOWN.
I understand that it is the cost of doing business but where does the spread monies end up?
In CFDs, FX when trading through a broker, it is usually the broker’s profit for offering a market.
I think I did! There’s a price to buy at and a price to sell at. I am sure I mentioned that more than once.
I agree, I didn’t get it either. Where does the spread go, WHY is it there other than “the cost of doing business” which you mentioned plenty of times, but who makes the money there? Is the spread a commission for the cost of running the platforms and providing these online computer trading services? Is the spread negotiable on large trades between say governments? Is it the same spread at all exchanges if the stock is treaded at multiple exchanges?
Which program or web page you using for the graphs?
Hi Angel, the trading app used in all videos in this channel is Trading 212. Trade with virtual funds in the Practice Money Mode of the trading account at https://www.trading212.com/en/Free-FOREX-Practice-Account-GBP.
Great Video as always David. This is such a simple concept but Can still confuse many people, including myself.
Looking forward to more and more of your great videos!
Informative. Thanks
Why do you have the same chart on three screens in the background? And why are they even there ? You obviously won’t use them while recording!
It sets the mood. Some people appreciate like that.
can you cover order books
Hi David, please in a future video can you explain how market cap and volume influence individual currency value. Thanks.
Bid is sell ask is buy?
Yes, the Bid price refers to the Sell price on Trading 212 and the Ask price refers to the Buy price.
Could it be though of the bigger the spread the bigger the risk? And this was what was happening with the crypto markets forcing people out dude to large spread.
I think that’s a fair point – you often see this in smaller, highly speculative shares – a wider spread.
Very informative! Thank you Sir!
Bid and Ask are like matter and antimatter. If they ever end up at the same point, they annihilate each other and your computer explodes.
Funny enough, when you said this, T212 still had 5 forex pairs *with zero spread*.
I cant help but ask the question. A lot of companies are sharing trading ideas and that you only need to profit 50% of the time to profit with the right money management plan. Since there are only 2 ways the chart will go, would it be fair to say that you have a 50% chance of profiting from each trade no matter your strategy providing you stuck to your money management plan??
Good question! You have a 50% chance of profiting from each trade (ignoring the spread) But what does for most people is they let their losses go too far. So, when they are wrong they lose $100 and when they are right they make $50. So the 50% coin flip approach falls flat on its face! It does highlight the importance of money management and letting profits run.
Can I show the spread visually so I can see visually how far the market needs to move to make profit, like a bar of some sort, ive seen other apps that enable me to do this and it’s very useful.
Hi Sadik, you may want to enable the Buy price option from the Chart Settings menu in the web app. This will display the Buy price as a line on the chart. The gap between the lines of the Buy and Sell price for the trading instrument in question is the spread.
You can both individually (de)activate ‘”BUY” PRICE’ and ‘”SELL” PRICE’ in the chart settings (web platform), which will show those lines/numbers in the chart. You can also switch the chart to be displaying the buy price instead of, like it does by default, the sell price.
Maybe interesting to know: While the broker IG has a great web platform (easily better than T212), it can not show the buy and sell price line simultaneously, like most platforms (incl. T212) can.
Not sure I understand. if xyz stock is trading for 500 and the bid / ask spread is like 499/ 501 which means you must pay 501 to purchase. Well who are you purchasing from?? Didn’t they just accept $501? Why can’t you turn around and sell it for $501. You can’t claim no one will pay that amount, you just did.
Ok, but if we look at a traditional market making model, you as the retail trader (if you want to trade now) will usually have to pay the 501 in the 499/501 quote. Of course, if you were trading using, for example, Direct Market Access/Level 2, you could in effect become the market maker yourself. But, in my experience, this only applies to a very small percentage of retail traders/investors.
This is a great video with lots of detailed information. Now, like everything there will be people critizing it. David Jones don’t try to make every body happy, you re not beer!
So there is no cost to trade on a zero spread currency? In a zero spread market, I can enter at 1.025EURO/USD and if it remains a zero spread I will not lose money but I will not make any until there is a spread. So is it safe to say a zero spread occurs in consolidation?
Hi Stephanie, if you are trading with a Zero Spread instrument, no spread will be applied upon opening the position. That is the only difference compared to trading with an instrument with spread.
I played with T212’s five zero-spread forex pairs a lot. (Too bad they phased them out by now.) Yes, if the price stays (or returns) exactly to where you opened the position, and then you close it – you will not have made or lost ANY money.
Mind that this is not generally true all across forex trading land. If ever you’d encounter a zero spread pair again (Unlikely.), there’s also the possibility that the account type you’re trading with charges you a small commission fee for each trade. I have such an account at the moment with a different broker. The benefit is that the spread is extremely low, so scalping (Which by the way T212 prohibits you from doing.) is possible.
Thank you David, excellent as always.
your videos are excellent.this one explained to me the zen of trading meaning the spread has tone tighter but i asked one broker and he said your buying price has to be lower than the selling one-no???
You explained this perfectly! Thank you. I look forward to watching more of your videos,
I have watched at least 5 videos trying to learn what Bid/Ask means and this is the first video that made me go “ohhh, so thats what it means and thats what I need to keep an eye out for” Thank you so much!!! Im from America and I love the accent!
Hi, i have one q for u.. if we buy limit curency, which price will hit our stop loss? Bid price or ask price
Hi Fadhel, a Stop Loss order assigned to a long position with a CFD instrument will be triggered at the sell/bid price.
Trading 212 thank you sir
Hey I have a request. Could you do a video on Kyle Model? And also Glosten Milgram model…
I’ve been using Trading212 for about a month now and I have taken my £500 Account to £4000, a great platform for beginners to Advanced Traders!
real money?
Excellent explanation. Brilliant really. Thank you very much David. Job well done, as usual.
great vid. thank you
why cant i drop a limit order on the chart and drag it around on the chart?
Can i buy actual cryptocurrency via trading 212 or am i jusr buying a “share” in a cryptocurrency? Ie if i bought 1 x bitcoin share via trading 212, am i buying an actual bitcoin that i can use or am i buying a share in bitcoin the company? Great informative and easy to follow videos btw 👍
Hi Darren, happy to know you’re liking the videos. Cryptocurrencies on the platform are traded as CFD instruments. This means that you’re speculating with their price, rather than purchasing actual units of that instrument. In case you’d like to ask anything else, please don’t hesitate to contact our support, where we’ll be happy to assist you 24/7.
thanks a lot, you’re a good teacher.
Hi David. Thanks for the video, very easy to follow. I have just started learning all of this and just confused about the buying and selling. I see the selling price is less than the buying price, which doesn’t make sense to me unless I decide to buy and wait for the price to increase. And the selling is something else altogether. Hope I have made myself clear enough. thanks again.
Hey Elio, it’s great to know you’re finding our videos helpful. The difference between the Buy and Sell prices represents the spread fee, which for equities is charged by the stock exchange and applies for each share you wish to invest in. As always, in case you have any other questions, you’re welcome to contact us via any of our support channels 24/7.
You look like Michael from Grand Theft Auto 5
Eli Ie 😂😂
so great thank you but I wanted to ask a question if the spread is really tight say 5 pips how do you actually make money of your buying higher and selling lower shouldnt that mean then you trading at a loss? Im new new to all this and find it a little puzzling. thank you
Can a spread be negative
Thank you David, well & clear explanation
How to set up bid and ask price on platform
Limit order you mean?
Hey is anybody using the full Trading212 broker???
I’ve been trialling the demo for a few weeks now. I like it. But would like to hear opinions.
Perfectly explained in simple words.
Thankyou
Very understanding.!!!
Do ETFs have spreads?
Chrystal clear, thank you. Yes the spread is the brokers commission. So generally speaking the spread correlates with the market volume, that is the greater the volume the narrower the spread and vice versa, the less the volume the greater the spread.
Thank you⚡️
Thanks for the explanation. Who profits from the “spread” though? Is it the trading platforms?
Please provide 2FA authentication
I don’t see ‘zero spread’ in my T212 listing :?? No results found it says.??
I totally understand how you explain that..
You’re talking about bid and ask offers, but on the trading 212 I’m not seeing any option to place a bid/ask offer. You can only buy at the current price, you cannot place any offers of your choice.
So how are these buy/sell prices computed then?
Are there any other brokers that allow you to bet like that? If so, is the bid/ask price that we’re seeing on trading 212 just a mirror of the offers from other brokers?
So the lower the spread the cheaper it is if you buy or sell?
That couldnt have been explained better. Very helpfull, thanks
What trading platform are this?
What is missing from the video is when to show the Bid or Ask price on a chart. As I realized (to my cost) that this makes a significant difference to where you place a Stop-Loss line on a chart.
Very well explained . many thanks
I am not able to see bid and sell price on live Trade 212 on ISA Account.Could you please help to know how to see these prices next to each other on 212 platform. many thanks
The way you express your idea is clear and concise! Thank u so much
Very clear, good work
Trading 212 CFD has PDT rule ?
How do you trade with forex to make profit?
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