Educational material from 
What you will learn
- Distinguish a buyer’s bid from the price at which you buy.
- Calculate the difference between the best bid and ask.
- Choose the correct base for a position return and an account return.
Read each quote from the other party’s side
Our snapshot has a best bid of SEK 100 and a best ask of SEK 101. A buyer offers SEK 100 while a seller requests SEK 101. If you buy directly from the available seller, the model uses SEK 101. If you sell directly to the buyer, it uses SEK 100. The word bid does not automatically mean your own purchase price.
We assume at least five shares are available at each price, the quotes remain unchanged through both trades and no other orders go ahead of yours. There are no fees, taxes or currency effects. These conditions make the example calculable. A real displayed quote is a snapshot, not a guarantee of price or available quantity when your order executes.
If the table does not fit, scroll it sideways.
| Price figure | Amount per share |
|---|---|
| Best bid | SEK 100 |
| Best ask | SEK 101 |
| Spread: 101 − 100 | SEK 1 |
Five shares through an account starting with SEK 1,000
The account starts with SEK 1,000 in cash. Five shares cost 5 × 101 = SEK 505. Afterwards it holds five shares and SEK 495 in cash. If those shares are immediately sold at the unchanged bid, the proceeds are 5 × 100 = SEK 500.
There are now no shares and 495 + 500 = SEK 995 in cash. The change from the start is −SEK 5 even though neither quote moved. The model crosses between two different sides of the market. The loss is five times the SEK 1 spread, rather than an additional commission charged by a broker.
If the table does not fit, scroll it sideways.
| Event | Cash |
|---|---|
| Before buying | SEK 1,000 |
| After buying five shares | SEK 495 |
| After selling five shares | SEK 995 |
The same five kronor produce two percentage measures
The whole starting account’s return is −5 / 1,000 × 100 = −0.5%. The closed position, however, cost SEK 505 and returned SEK 500. Its return is −5 / 505 × 100, approximately −0.99%. The cash difference is identical, but the questions use different denominators.
It is therefore unclear to say the spread cost one percent without explaining one percent of what. The SEK 1 difference per share can also be expressed relative to a stated reference price. Here we keep the spread in kronor and separately show the account and position returns, making each calculation easy to check.
Separate the spread from the last trade and order depth
A last-traded price describes an earlier completed transaction. It need not equal either current quote. Check when the figure applies and how many shares are available at that level. If only one share is offered for SEK 101, you cannot assume all five can be bought there.
Continue with the liquidity lesson to calculate a purchase across several price levels. You can also use a decision note and distinguish holdings from cash with Investiq’s portfolio guide. This frozen quote snapshot is a manual teaching model; it does not describe a particular spread or order-book feature in the app.
Try it yourself
The best bid is SEK 49 and the best ask SEK 50. Start with SEK 1,000, buy ten shares and then sell them all at the unchanged bid. Enough shares are available and there are no fees. What is the final cash balance and whole-account return?
Show the solution and explanation
The final balance is SEK 990. The account loses SEK 10, a return of −1%.
Buying costs 10 × 50 = SEK 500, leaving SEK 500. Selling returns 10 × 49 = SEK 490. Total cash is 500 + 490 = SEK 990. The position’s own return is −10 / 500 = −2%; the whole starting account uses a different base.
Check your understanding
Why do you buy at the ask in this model?
It is the price requested by the available seller. The bid is an offer from somebody who wants to buy.
Is the spread a separate transaction fee?
No. It is the difference between the quotes. Fees can also apply, but are excluded here.
Practise with virtual money
Try what you just learned in a practice portfolio with virtual money. You don't deposit any real money.
How the practice portfolio worksKeep learning and practising
More lessons on this topic
Trading, risk and benchmarks
Sources and examples
The sources support the factual explanations. Calculations and exercises were created for this lesson. Amounts and price changes are invented unless stated otherwise.
This material is educational and does not recommend securities to buy. A simulated result does not guarantee a future result.
