What is a Clearing Price?

Clearing price is a term that is often used in the stock market. If you plan on trading the market, you need to understand what the clearing price is and how it affects you as an investor.

Bid and Ask

Whenever you start to trade a security, you will immediately notice that there is a discrepancy between buyers and sellers. Buyers always want to pay a lower price for the securities while sellers always want to get the highest price that is available. This is where bid and ask prices come into play.

Clearing Price

Even though there is a discrepancy between the bid and ask price when selling a security, the price that the security actually sells at is typically different. When a buyer and seller come together, they will usually do so on middle ground between the bid and ask prices. This price is known as the clearing price. It is referred to as this because this is the price that it finally clears the market. Therefore, if you want to know what the clearing price of a particular security is, all you have to do is look up the most recent trading results on that security. The price that it sell that is known as the clearing price.