You've learned about how stock prices are determined by supply and demand, but how does that actually work behind the scenes? 💰

Bid price = the highest price that a buyer is willing to pay for a stock 📈

Ask price = the lowest price that a seller is willing to accept for a stock 📉

Let’s say Bezos is trying to sell you one share of Amazon stock for $115, but you only want to pay $100 🤔

$100 is the bid price 📈

$115 is the ask price 📉

When you place an order, the role of a stock exchange is to bridge other bid and ask prices in the market to determine a fair price to fill your order at 🌉

The spread = difference between the bid and ask prices 💱

With our Amazon example, the spread is $15 😮

The spread can be affected by many different factors, including supply and demand, market conditions, and how popular a stock is 📊

Popular stocks that have lots of people buying and selling them typically have smaller spreads 🤏

This is because with so many bids and asks, it's easier to find an ask that's close to your bid, or a bid that's close to your ask.

Meanwhile, less popular, smaller stocks can have very high spreads.

This makes it harder to buy and sell these types of stocks for the price you want 😔