In contrast to the ask price, the term bid represents the highest price an investor or trader is prepared to pay to purchase an asset. The bid price is always lower than the ask or offer price.
A bid price is normally determined after a seller and one or more buyers negotiate the price. Liquidity providers in the market constantly make bids for securities. In some cases, bids are made when a seller demands a price that allows them to sell the stock.
On the other hand, buyers will sometimes make bids even if a seller is not considering selling, and this is known as an unsolicited bid.
In instances where two or more buyers are fighting to buy a stock by incrementally increasing their bids, this is considered a bidding war. A bidding war is similar to auctioning, where a price is settled upon when one of the buyers stops increasing their bids to top their rival.
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