Let's continue with lesson three
#education What
is
Spread? The simple answer is
The spread is the difference between the buying price and the selling price.
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Consider that a used car dealer makes
profit from the price they offer you in exchange
for parts and the price they charge the new owner
when
selling your old car.
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So what is
Spread? The simple answer is
The spread is the difference between the buying price and the selling price.
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The bid price is the highest price the buyer says they
are willing to pay. The "ask" price is the highest price
that the seller hopes for. The price is agreed upon between these two numbers.
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The broker stands in the middle of this conversation. They can
profit from the difference between the bid price and the ask price.
Thus, the spread can include a number of
fees or other costs. It is not always possible that
and
there is a net profit for the broker.
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The usual doubts: supply and demand. The spread can also widen
at times of volatile markets (when
the number of sellers exceeds the number of buyers). Meanwhile, if you are
buying stocks that are regularly bought and sold
on demand, the spread may be low.
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The spread always fluctuates, especially when
traders and investors depend on and
respond to new information.
15/24 For example, you might hear someone talking about
the stock price spread during trading - whether that
is a week or three days. "The spread on the stock
was less than I expected."
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