CHAPTER VI 
A TYPICAL INVESTMENT TRANSACTION 
Bidding and Asking.—Before plunging directly into a 
detailed account of how securities are purchased and sold on 
the Stock Exchange, it is necessary to consider in a general way 
what sales are and how they are made. Every sale on the Stock 
Exchange, or anywhere else for that matter, naturally involves 
two separate parties—a buyer and a seller. . The buyer, who 
expresses the demand for the property to be purchased, wishes, 
of course, to obtain it as cheaply as possible, while the seller, 
who expresses the supply side of the market, is equally desirous 
of getting the highest possible price for his goods. The inter- 
ests of the buyer and the seller are, therefore, in direct opposi- 
tion to each other. Hence, the seller almost invariably “asks” 
more for his goods than the buyer willingly “bids,” and usually 
it is only after considerable higgling that a compromise is 
reached and a sale is effected at some intermediate point in the 
“spread” or difference between these bid and asked prices. 
When, for example, A tries to sell his automobile for $500 to B, 
who only wants to pay $400 for it, the situation might be de- 
scribed in financial language as “$500 asked—$400 bid.” If A 
was only as anxious to sell as B was to buy, they would probably 
split the difference or spread of $100 and close the deal at $450. 
But if A was more eager to.sell than B to purchase, he might 
have to take $425 or less for his car; while if B was more 
eager to purchase than A to sell, he might have to pay $475 
Or more. 
Market Price Fluctuations.—Obviously, the stability of 
any price must depend upon the extent of the “spread” between 
existing bids and offers. When the “spread” amounts to 100 
a