What is Bid and Ask?

Bid price is the point at which a buyer is ready to buy. Ask price is the value point at which the seller is ready to sell. When the two value points match in a marketplace, such as when a buyer and a seller agree to the prices being offered by each other, a trade takes place. 

These prices are determined by two market forces -- supply and demand, and the gap between these two forces defines the spread between buy-sell prices, this is called bid-ask spread. The larger the gap, the greater the spread. 

Bid-Ask Spread is typically the difference between ask (offer/sell) price and bid (purchase/buy) price of a security. Bid-Ask Spread can be expressed in absolute numbers as well as percentage terms. When the market is highly liquid, spread values can be very small. But when the market is illiquid or less liquid, they can be large.