Investing article: Understanding Bid, Ask, and Spread

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Many people are intimidated when looking up the prices of stocks. There are so many different numbers. What do they all mean?

Understanding stock prices doesn't have to be a scary situation. All you need to know is a little about what the numbers mean to you.

The current price of the stock is the price of the most recent trade that was completed for the stock. This is the last purchase price of the stock. This doesn't guarantee that you will get that price for the stock, but it gives you an idea of where it is trading at right now. Most stock quotes are time-delayed by up to 20 minutes, unless you are given a "real-time" quote. Remember, stock prices change so quickly that the last price given may no longer be current in a few minutes.

Most stocks will also list a high and low price for the day. These are the highest and lowest prices at which the stock was traded during the day. The same applies for the 52-week high and low prices -- the highest and lowest prices over a 52-week period.

When looking at Nasdaq-listed stocks, you will see information on the bid and ask prices for a stock. The bid is the highest price that any principle brokerage firm is willing to pay for the stock at a particular time. This is what they are bidding on the stock. They are basically putting the price out there for any sellers that will accept.

The ask is the lowest price that any principal brokerage firm is willing to sell a stock at. This is their selling price.

The spread is the difference between the bid and the ask prices. For example, if the bid is $20 and the ask is $30, there is a $10 spread.

When looking at the stock tables in the newspaper, remember that these numbers are the prices of the last trades on the day before. Internet quotes will often provide you with the most recent trades.

Keep in mind that prices can change quickly. When you are buying, you may pay more than or less than the most recently quoted price on a stock. This is because the price is constantly changing. It goes up and down by pennies, and sometimes dollars. There are many factors that cause this fluctuation.

These fluctuations are where opportunities are found for many investors. They can create the prime time to buy a depressed stock or a great selling time with an elevated stock. When these fluctuations happen for no clear reason, chances are that they will right themselves.

Keep your eye on your investments. Keep your ears open and listen to what is going on in the companies you invest in. Learn to read the stock tables and know what the numbers mean to you. But remember, management means that you follow your pre-set guidelines on when to buy and sell. Don't be tempted to make rash decisions just to make a few dollars.

About the author of Understanding Bid, Ask, and Spread

Martin Lukac http://www.MartinLukac.com , represents http://www.RateEmpire.com , an Internet consumer banking marketplace. RateEmpire.com is a destination site of personal finance, investing, taxes and mortgage rates. RateEmpire.com provides mortgage guides and financial rates and information. RateEmpire.com also operates a financial portal #1 American Financial, found at http://www.1AmericanFinancial.com