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Stock A has a bid price of $100.08, an ask price of $100.10 and a last trade price of $100. I take that to mean that if I buy the stock at $100.10 then I will have lost a total of two cents.

How does a person make a profit when buying and selling stock? Do I wait until the bid price is higher than the ask price that I paid?

I hope that I don't confuse anybody because I'm pretty confused myself.

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My question is how does a person make a profit when buying stock?

By selling higher than he bought or buying lower than he sold (for short).

You are nice to point out you know what bit and ask are, with example - but are you also aware that the price MOVES with time normally? So, you could sell higher than buying when the price moves up enough for an active sell, or at least enough that you can put a limit sell in that gets you a higher price when someone hits it.

Do I wait until the bid price is higher than ask?

Exactly. And generally SIGNIFICANTLY higher, unless you are a scalper. Remember, you ALSO pay fees and you ALSO will have losses. So your plan should not be to sell for a 1 cent profit. Significantly can mean a lot (depending on timeframe and strategy), but remember you should never forget costs, particularly when doing small profits.

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how does a person make a profit when buying stock?

You don't. Profit is made when you sell at a higher price than what you bought it at.

Consider the man with an apple cart selling apples. Does he make a profit when he buys the apples from a wholesaler? Of course not. He (hopefully) makes a profit when he sells the apples for more than it cost him to buy* the apples.

*Ignoring, of course, the cost of the apple cart, business licence, getting from the wholesaler to wherever you sell the apples, loss due to spoilage and theft, etc.

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  • Though many informally say that the amount of any profit you might make is largely determined by what you paid for it, i.e. at buy time.
    – WBT
    Dec 28 '20 at 23:06
  • @WBT informally? That's part of the formal definition. But no profit (or loss) is realized until you pull the trigger and sell.
    – RonJohn
    Dec 28 '20 at 23:13

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