What is an ask price?

Ask Price

The minimum price that a seller is willing to accept for an asset. The ask price is also sometimes referred to as the offer price.

What is an ask price?

The ask price is one of the most fundamental factors in the functioning of any exchange.

It is part of the two-way “bid and ask” system for quoting prices. The bid price is set by the buyer and is the maximum amount they are willing to pay for the asset in question, denominated in the base currency.

When making an immediate trade on an exchange (known as a market order,) buy and sell orders are matched with the most beneficial corresponding prices — so a buy order will be matched with the lowest ask price, and a sell order will be matched with the highest bid price.

Imagine you wish to trade a fictional coin. You see that the market price of that coin is $100/$120. This implies that you will pay $120 to buy the coin, while a seller will receive $100 by selling one.

The difference between the ask price and the bid price is known as the spread. This is where the exchange makes its money and covers its running costs.

Spreads are also closely linked to market liquidity levels — that is, how easy it is to buy or sell an asset.

Highly liquid markets tend to have smaller spreads because there are more participants willing to trade, while low liquidity is often accompanied by larger spreads.

Spreads are also influenced by factors such as changes in transaction costs.

Some exchanges market themselves on the basis of their average spread size in an attempt to attract traders away from competitors.

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