Are you confused between a bid and an offer when it comes to trading such as stock and forex? If yes, then this will make it clear about the definition of a bid and an offer plus the examples I have written below this. The concepts are easy to understand, it is just that beginners have to adapt to the concepts first before they can understand them. However, to make it simple you can just see the image above here to have a clear understanding regarding a bid and an offer. After that, you can read the definitions below here to see if what you interpreted from the image is right or not.
Bid
From the book that I read that is written by Dicks (2010, p. 21), a bid is where a trader other than you, places a pending order in hope that the price is low enough to be bought. Simply, the key point is that bid is where the buyer who wants to acquire something where he or she has analyzed that the price is low enough and has a potential to go up by taking a long position once the price reaches a specific price.
For example, you are trying to analyze the EURUSD pair and on the chart, you see that the price has reached the support level of 1.09000. By looking at the support level, you decide to take a long position where you set 100 pips on your take profit and also 100 pips for your stop loss (SL) level, or to be precise you use a 1:1 risk-reward ratio. After that, you can take a sip of coffee or even listen to your music gallery whether it will hit your TP or SL.
Offer
After you have understood the bid definition you can just reverse your understanding about a bid to have a clear idea of an offer. However let us take a look at the definition first where according to Dicks (2010, p. 21), a bid is where a trader places a pending order in hope that the price is high enough to be sold. It means that it is just a contrast of a bid and the key point is that this emphasizes the seller who wants to profit by taking a short position once the price reaches a specific price.
For example, you are a forex trader that wants to sell EURUSD by taking a short position at 1.11000 and you see on the chart that the price you want to sell is an important area which is a resistance area, and before that, there is a raging bull period. Therefore, your result of the analysis indicates that the EURUSD price has the potential to go down after the raging bull period which makes you open a short position with a 1:1 risk-reward ratio such as 100 pips on stop loss and take profit target.
Conclusion
Simply, a bid (buyer) is a trader that wants to buy at what he or she perceives that the price is low enough so that he or she can gain profit buying at a low price to sell it later at a high price by placing a pending order in advance. While an offer (seller) is where a trader who wants to sell at what he or she perceives is a high price to gain profit from it by placing a pending order at a specific price.
Written by Andre I.
Reference
Dicks, James. 2010. Forex Trading Secrets: Trading Strategies for the Forex Market. New York: McGraw Hill.