Bid/Ask Spread question

[Mad Girl Investor]

What does it mean when the difference between bid and ask is significant?

Ex: SLS..... bid .75 x ask. 79

Penny stock, so each fraction of a penny is significant.

Its not moving much so far yet

[zyzzyva57]

You want Widget, so you Bid $10

I want to sell Widget at $11

The spread is $1

In the stock market, someone else will say, I will Ask $10.10

The stock price for that moment in time is now $10.10

The jiggle of a stock price is people constantly swapping stock, because someone else may Ask $10.09 or $10.11

The pros buy and sell with Limit orders...For example, if I want Widget because I see it heading up, I will place a Limit Order to buy at $10.15...This will purchase that amount of stock at any price at or below $10.15

I may buy at $10.13, but if you come next in line of transaction, you could buy the same amount of stock for $10.07, because someone has placed a Limit Order to sell at $10.06 or greater

This is why you only Bid or Ask precisely (in Limits), particularly if you have a lot of stock to sell...Newbies Buy and Sell at Market, which could well screw you

You can see this if you decide to buy Widget...You look at the spread to get the feel for how the stock is flowing

The RSI will provide you a chart look at the ebb and flow of a stock, but not moment by moment, which day traders, nanoseconds traders, and the Cramers look for and at

[BigDawg291]

Good reply zyzzyva57. I learned this after trading for a week or so because I kept noticing when I placed my market order it would be higher than I really wanted to buy for and I was getting screwed everytime I bought anything. Now all I do is Limit orders.

[zyzzyva57]

This is why if you listen to Cramer carefully he always stresses you never-ever buy at Market! It leaves you wide open for the pros to do a number on you, particularly if you have a lot of money involved. In my case, learning, this is not a big issue with me, but I want it to be, so I am developing the habits of the Cramers, so should I have more and more to play with, trading like the Cramers will be a second nature to me.