## How to Read the Stock Market Smartly: Bid Offer is the Real Deal You Need to Know

If you're new to the world of securities trading, the term "Bid offer" might seem like a complicated technical term. But in reality, it's a tool that clearly indicates market intentions. Every time you see these two numbers fluctuate on your screen, they tell the story of the battle between buyers and sellers.

## The Two Sides of the Market Coin: What Are Bid and Offer?

**Bid** or the purchase price shows the highest price a buyer is willing to pay at the moment. It represents market demand. The more buyers offering higher prices, the higher the Bid. **Offer** or the selling price is set by various sellers, representing the lowest price they are willing to accept to sell the security.

The important point is: the Offer price is always higher than the Bid price. Sellers want to get more money, and buyers want to pay less. The difference between these two prices is called the "spread," which indicates how tight or loose the market is.

## When are Bid and Offer Narrow or Wide?

To observe the market seriously, traders need to recognize patterns in Bid and Offer that reflect market conditions:

**When Bid and Offer are both narrow** – This indicates a trend exists, but trading volume isn't yet sufficient. It's a signal to watch closely, because if volume increases, prices may follow.

**When Bid is narrow but Offer is wide** – This is a very interesting sign. There are many buyers, but very few willing sellers. It may mean that large investors are hoping for further price increases. The Offer price tends to rise.

**When Bid is wide but Offer is narrow** – Usually occurs at the end of a trend. Many sellers but few willing buyers. Prices tend to fluctuate without significant progress. Caution is advised during this phase.

**When both are wide** – The highest trading volume. If this occurs at a bullish signal, prices could soar. But if at the end of a trend, it's better to stay out.

## Why is Bid Offer Important?

Many think Bid and Offer are just numbers to see trading volume, but they tell much more.

First: Bid and Offer help you understand market intentions. Market orders will close at the Bid or Offer price depending on whether you're buying or selling. There's no certainty about the exact price.

Second: Bid and Offer are crucial for effectively using limit orders and stop-loss orders. Without understanding them, your orders may not perform as expected.

Third: They indicate how liquid the market is. Securities with high trading activity tend to have narrow Bid and Offer. Less traded securities often have wide spreads.

## How to Truly Read the Meaning of Bid and Offer

When demand exceeds supply, both Bid and Offer increase. Simply put, more buyers lead to higher prices set by sellers. Conversely, when supply exceeds demand, both Bid and Offer decrease.

An interesting case is when Offer decreases but Bid remains high. This signals strong buying interest, but sellers are becoming cautious. Often, this is a prelude to prices rising again.

## Benefits You Can Gain

From a seller's perspective: Bid and Offer tell you "How much others are willing to pay for what I have." If Bid is high, your stock is in demand.

From a buyer's perspective: The Offer price indicates "How much I need to pay if I want to buy." A low Offer price means you're lucky; the asking price isn't too high.

## Cautions and Drawbacks

**Problem with Bid:** Bid prices are always lower than Offers. Often, sellers refuse to sell at the Bid price. The real issue is that Bid may not reflect the true value of the security because it depends on market sentiment at that moment. During bear markets, sellers' fears cause Bid prices to plummet.

**Problem with Offer:** Offers are often higher than the current market price. If you place a market buy order, you might pay more than expected. Sometimes, new traders are unaware of this, leading to rising costs.

For low-liquidity securities, (few traders), the Bid and Offer can be so wide that trading becomes nearly impossible.

## Comparative Analysis: Bid vs. Offer

| Function | Bid | Offer |
|------------|-------|--------|
| Price | Highest price buyers are willing to pay | Lowest price sellers are willing to accept |
| Significance | Indicates demand | Indicates supply |
| Comparison | Usually lower than Offer | Usually higher than Bid |
| Meaning | Market interest in buying | Market readiness to sell |

## Real Case Study: Learning from Experience

Imagine that Somsak is a novice trader wanting to buy shares of Company A. The stock price is shown at $173. He plans to buy 10 shares, paying $1,730.

But when he actually places the order, the total comes out to $1,731. He's very confused.

What he doesn't know is: The $173 displayed is the price of the most recent transaction, not the current Offer price. The actual Offer is $173.10. This teaches him that "Displayed stock price" and "Actual purchase price" are different.

## Summary: Why Bid and Offer Matter to You

Bid and Offer may seem like small details, but they reflect the true state of the market. The term Bid offer allows you to read the market's mind.

Highly liquid securities (such as large-cap stocks) tend to have very narrow Bid and Offer spreads. Less liquid securities (such as small-cap stocks) often have wide Bid and Offer spreads that are clearly visible.

To become a skilled trader, you must learn to read Bid and Offer because they are the language the market uses to communicate with you every second of every day. Understanding them is a key step toward increasing your profits.