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I am new to stock investments. I usually ask for stock broker to write up a quote for me. I can also check the prices on the Malawi Stock Exchange website.
However I am not sure which price she quotes,the buy or the sell? My question is what is the difference between the two,If I am selling my shares which price should I look at,and also if I am buying which price do I look at? The questions I looked at made reference to Bid and Ask which are not terms used on the Malawi Stock Exchange. Can someone clarify this for me please as the terms used in the US may not be the same

marked as duplicate by keshlam, JoeTaxpayer Feb 5 '16 at 14:40

This question has been asked before and already has an answer. If those answers do not fully address your question, please ask a new question.

  • Duplicate of past answers. Search for "buy sell price" or "bid ask price" – keshlam Feb 5 '16 at 14:09
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The same as when you are buying a car. If a dealer quotes 10k and you quote 8k. 8k is the buy price and 10k is the sell price. Somebody might quote 8.5k and another dealer might quote 9.5k. The the new price that you see on your screen is 8.5k(Best buy price) and 9.5k(Best sell price). When the buyer and seller agree to an amount, the car(In your case stock) is traded.

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The Bid price is simply the highest buy price currently being offered and the Ask price simply the lowest sell price being offered. The list of Bid and Ask prices is called the market depth. When the Bid and Ask prices match then a sale goes through.

When looking to sell you would generally look at both the Bid and Ask prices. As a seller you want to be matched with the Bid price to get a sale, but you also need to check the current list of Ask prices. If the price you want to sell at is too high you will be placed down the Ask price list, and unless the price moves up to match your sell price you will not end up selling. On the other-hand, if your price to sell is too low and in fact much lower than the current lowest sell price you may get a quick sale but maybe at a lower price than you could have gotten.

Similarly, when looking to buy, you would generally also look at both the Bid and Ask prices. As a buyer you want to be matched with the Ask price to get a sale, but you also need to check the current list of Bid prices. If the price you want to buy at is too low you will be placed down the Bid price list, and unless the price moves down to match your buy price you will no end up buying. On the other-hand, if your price to buy is too high and in fact much higher than the current highest buy price you may get a quick purchase but maybe at a higher price than you could have gotten.

So, whether buying or selling, it is important to look at and consider both the Bid and Ask prices in the market depth.

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To add to @Victor 's answer; if you are entering a market order, and not a limit order (where you set the price you want to buy or sell at), then the Ask price is what you can expect to pay to purchase shares of stock in a long position and the Bid price is what you can expect to receive when you sell stock you own in a long position.

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This is copying my own answer to another question, but this is definitely relevant for you:

Terminology

Bid

A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5.

Ask

An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6.

Trade

A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows.

Shorting

Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest).

Going Long

Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up.

The process

So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long.

Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible.

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