Bid, Ask, and Spread basics. I think the Fool.com does a pretty good job of explaining bid, ask, and spread: Could someone please explain what bid and asked prices are?
Think of an auction. The "bid" is the price closest to the last transaction that buyers are willing to buy at. The "ask" is the price closest to the last transaction that sellers are willing to sell at. You can also think of them as the market price of a stock--bid being the market price if you are selling "at the market" and ask being the price if you are buying at the market. The difference between the bid price and the ask price is called the "spread." It is a fee that the market maker pockets as payment for keeping the market liquid. Generally, you will only see bid and ask prices quoted for NASDAQ stocks. On the NY and American exchanges the spread is a more uniform 1/16 to 1/8 point. OK, so what is the bid/ask "size" that I see in quotes sometimes for stocks trading on the NYSE and ASE?
The NYSE and other listed exchanges (ASE, Midwest, Boston, Pacific etc.) use "specialists" to match up the orders for a particular stock. The size of the bid/ask shows how many shares the specialists has available at those prices. For example:
Bid 14.25 x Ask 14.50, 37 x 90 <---- bid-ask size
This means that at the current moment, the specialist has offers on his books (bids) to buy 3,700 shares at 14.25 and offers (asks) to sell 9,000 shares at 14.50.
In general, a larger ask size than bid size means that at the moment, there are more sellers than buyers and thus downward pressure on the stock's price. This could change in an instant though, so it isn't that helpful unless you're a market maker or very sophisticated trader.
On the Nasdaq, because there isn't one specialist balancing a book of orders like there is on the more "organized" exchanges, the size of the bid/ask means almost nothing. Resources