Bid price
Family VII · Market & styles
Not to be confused with ask price, bid ask spread.
Bid price is the top of the queue of buy orders resting in the order book for a given instrument. It represents the best available price at which a holder can sell right now, and it moves as buyers add, cancel or fill orders. The bid is quoted alongside the ask price, and the gap between the two is the spread.
How the bid is formed
Quotes are assembled from limit orders that specify a maximum buying price. The highest of those limits becomes the best bid; lower bids sit behind it in the book. Market makers and other liquidity providers compete on price and size, so the best bid can change many times per second in liquid markets.
The size shown at the bid is the quantity available at that price, not the total demand for the instrument. Once those shares or contracts are filled, the next bid in the queue becomes the best bid.
Worked example
The first 100 shares fill at the best bid; the remaining 150 fill at the next bid level, so the average execution price is below the quoted bid.
Bid, ask and spread
The bid is one side of a two-sided quote. The ask price is the lowest price a seller will accept, and the difference between the two is the bid ask spread. A narrow spread generally indicates a liquid, actively traded market; a wide spread indicates thinner liquidity or greater uncertainty.
Quotation conventions, tick sizes and the treatment of odd lots vary by venue and jurisdiction, so the displayed bid is not necessarily executable for every order size.
Often confused with
- ask price
- The ask price is the lowest price a seller will accept and the level at which a buyer can execute immediately, whereas the bid is the highest price a buyer will pay; the two sit on opposite sides of the quote, with the ask always the higher of the pair.
- bid ask spread
- The bid ask spread is the difference between the two quoted prices rather than a price itself, so it is a cost or liquidity measure; it is visible as the gap between the bid and the ask, not as a single quoted level.