1: Ask definition
2: How Ask works
3: ask vs bid
4: example of ask
Opening information:
Ask means request for some matter to sell one or more materials or elements.
The ask didn’t have any object physically, which is only a request of concept to run any trade.
So this article contains information about what is an ask, how an ask works in the stock market, and what is the difference between an ask and a bid, finally one clear example of an ask.
1: Ask definition
Mr. Kitanin is a businessman selling very old rare matters which are even hard to find in a museum, whenever he has anything, Kitanin leaves it for auction in the market.
One day kitanin had multiple million dollars worth of one item, which cost around 26.8 million dollars. This item would be a diamond.
The kitanin accepted the request to sell the diamonds only for $34 million, even though it only cost a price about $26.8 million.
Diamonds would be requested from a buyer for different kinds of price, but no one requests to buy the diamond for greater than 30 million.
But Kitanin was strict with his rules to accept the request to sell the diamonds for only 34 million dollars.
After a long time, he got the one-matched buyer to accept his selling deal for only 34 Million dollars.
Here the request kitanin created for the diamond to sell in an auction market is called an ask.
This same ask request would be created and traded among the stock Investors and market markers in the stock market.
2: How to Ask works
When comes to the stock market, the ask is a request which is used to sell shares of stocks for purchased Investors.
This same ask kind of function would be used as a bid on the opposite side’s request to buy shares of stock from the Investor’s standpoint.
This ask would be not used by the Investors, the ask could be made and created by the market maker.
Every pair needs enough liquidity to execute trade, the liquidity is the one which is made given by the market marker.
This market maker is also called a dealer, without dealers no pair gets high liquidity. When there is no market Maker there is no purpose for creating a ask and bid.
Pair means each distinct securities which the Investor today buys and sells among it.
When any of the buyers sell the stocks, they are not selling to the sellers, they are selling their shares to the market maker on the asking price.
Using this ask, the Market maker would be given the asking price, which means the selling price would be considered as an ask.
Any seller who buys a stock that considerably buys at the bid price, and sells at the asking price, but not to other Investors but instead to the market maker.
This market maker uses the ask choice to hold enough liquidity on the security market and act as a middleman or institution between the buyer and seller by creating a spread.
In reverse any of the buyers once purchased the Securities would only have a chance to sell those shares for an asking price.
And market maker bought the security for the ask instead of the bid price, and they sold the bid price to other Investors by creating a spread using an ask option.
Moreover, most people’s confuse about the ask and bid, so let’s dive into the key difference in it.
3: ask vs bid
The difference between the ask and bid are, ask means an offer from the market maker to sell the purchased securities in the market.
A bid means an offer from the market to buy a particular security from the current market.
So the key difference between the bid and ask are spread, and the price which are difference between the bid and ask is the spread. That’s how the market maker makes money.
To make you more clear about the ask, let’s look into one clear example anyway.
4: example of ask
Say you had a buy price of $9.09 and a sell price of $7.09, And you had 10,000 dollars in your investment account.
using the $10,000 you had bought the 1,100 shares of tech stock but now if you sold the shares suddenly,
You only receive 7799 dollars in your investment account back.
Here the sell price is an ask and the buy price is bid in the stock market. This ask and bid would be created and executed by all market makers.
Market rule: #100195
Ask is the market rule, because ask is involved in maintaining profitability for the market maker through maintaining liquidation of the market. But any decision which is taken from the investors is completely the responsibility of your side.
So If your investor and not comply or align investing based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.