What is Bid and Ask?

The term bid and ask is a two-way price quotation that indicates the best price at which an asset can be sold and bought at a given point in time. The difference between the bid and ask prices, or the spread, is a key indicator of the liquidity of the asset. In general, the smaller the spread, the better the liquidity. The bid-ask spread can widen dramatically during periods of illiquidity or market turmoil, since traders will not be willing to pay a price beyond a certain threshold, and sellers may not be willing to accept prices below a certain level.