Understanding Bid and Ask Size on a Stock Quote

Equities Quote Numbers That Are Crucial for Investors

Reviewed by Charles PottersFact checked by Michael RosenstonReviewed by Charles PottersFact checked by Michael Rosenston

When you look at a stock quote, you’ll see a flurry of numbers, among which are two critical pieces of information: the bid and ask sizes. These numbers offer a window into the stock’s liquidity and market sentiment, but many investors overlook their importance.

The bid size is the number of shares that buyers are willing to purchase at the bid price, while the ask size shows how many shares sellers are offering at the ask price. These figures reveal much about the supply and demand of a stock at any given moment.

Whether you’re a day trader looking to capitalize on short-term price movements or a long-term investor assessing a stock’s liquidity, grasping these concepts is crucial for navigating the stock market effectively.

Key Takeaways

• Stock quotes display the bid and ask prices, as well as the bid and offer sizes, for the shares in question.
• The bid is the best price somebody will pay for shares (and where you can sell them), and the ask is the best price somebody will sell shares (and where you can buy them).
• The bid size and ask size indicate how many shares are available at each price.
• The bid size and ask size are a combination of all pending orders in the market across all investors.
• The order book for a stock will show its depth and liquidity by revealing the next best bids and offers and their sizes.

Understanding Bid and Ask Sizes

When you look at a stock quote, two essential figures are the bid and ask prices, representing the highest price buyers are willing to pay and the lowest price sellers are willing to accept, respectively. However, another critical element of a stock quote that many investors look past is the bid and ask size. These figures tell you how much volume of a stock is available at the bid and ask prices.

What Is the Bid Size?

The bid size is the number of shares a buyer is willing to purchase at the bid price. For example, if the bid price for a stock is $50 and the bid size is 1,000 shares, that means buyers are looking to buy 1,000 shares at $50.

The larger the bid size, the stronger the demand at that price. Conversely, a small bid size suggests weaker buying interest, potentially indicating bearish sentiment.

What Is the Ask Size?

The ask size is the number of shares a seller is willing to offer at the ask price. For example, if the ask price is $51 and the ask size is 500 shares, sellers are looking to unload 500 shares at that price. Like bid size, the larger the ask size, the stronger the selling interest.

If ask sizes are consistently larger than bid sizes, it indicates selling pressure, which could drive the stock price downward. Conversely, if the ask size is small, fewer sellers are willing to offer shares at that price, which could help push the stock price higher.

Volume vs. Bid-Ask Sizes

Volume reflects completed trades, while bid/ask sizes show the potential supply and demand at given price levels in real time.

How Traders Use Bid and Ask Size

Day traders and market makers closely monitor bid and ask sizes to inform their trading decisions. For example, large institutional buyers or sellers can place orders that significantly impact bid and ask sizes, influencing the stock’s short-term price direction. When traders sees a large order on the bid side, they might join the queue, anticipating that this demand could push the stock price up.

Similarly, traders may use the ask size to time their exits or short-selling strategies. If they notice large sell orders in the ask column, they may take this as a cue to sell before the price drops further.

Levels of Stock Data

The U.S. stock market has three tiers of quotes: Level 1, Level 2, and Level 3. Looking at these allows an investor to see how a stock is performing and where the market action is. Traders most often rely on Level 1 and Level 2. These data sets give increasingly detailed information about the market’s supply and demand.

Level 1

Level 1 data offers a basic snapshot of a stock’s trading; it’s the one most investors have available on their brokerage screen for a given stock. For bid and ask sizes, it provides the following:

• The best (highest) bid price and its corresponding size
• The best (lowest) ask price and its corresponding size

For example, a level 1 quote might show a bid of $50.00 with a size of 500 shares, and an ask of $50.05 with a size of 300 shares. This tells traders that the largest buyer is willing to buy 500 shares at $50.00, while the most competitive seller offers 300 shares at $50.05.

While Level 1 data is useful for quickly assessing a stock’s prices and liquidity, it is limited in scope.

Note

When you’re placing a market order for a stock, you’ll see sizes in terms of board lots. A board lot is a standardized number of shares used as a trading unit by an exchange. This is typically 100 shares.

Level 2

Level 2 data, also known as the “order book” or “market depth,” provides a more comprehensive view of bid and ask sizes. It shows the following:

• Multiple bid prices and their sizes, typically arranged from highest to lowest
• Multiple ask prices and their sizes, typically arranged from lowest to highest
• The market makers or exchanges associated with each order

A level 2 quote might reveal that beyond the best bid of 500 shares at $50.00, there are also 1000 shares bid at $49.95, 750 shares at $49.90, and so on. On the ask side, it might show 500 shares offered at $50.10, 800 at $50.15, and 300 at $50.05.

This expanded view allows traders to gauge potential support and resistance levels and assess market liquidity to make more informed decisions about trade timing and size.

It’s important to note that while Level 2 data provides more detail, it doesn’t capture every order in the market. Some orders, such as those placed through dark pools or as hidden orders, won’t appear in Level 2 data.

Level 3

Level 3 data is not as commonly discussed or available as Level 1 and Level 2 data, but it offers an even deeper level of market information and is typically only available to market makers and institutional traders. It includes all the information from Level 1 and Level 2, plus:

• The ability to enter quotes and execute orders
• Access to historical trade data and analytics
• Real-time trade execution reports
• The capability to view and manage order flows

In essence, Level 3 data allows users to not just view the market but actively participate in making it.

Technical Trading and Bid and Ask Size

Traders examine the bid and ask sizes to gauge the balance of buying and selling pressure. Larger bid sizes than ask sizes may indicate stronger buying interest, while larger ask sizes could signal more selling pressure. Technical traders also use the bid and ask sizes to gauge the following:

Support and Resistance Levels

Significant bid or ask sizes at certain price levels may act as support or resistance. For example, a large bid size at a round number like $50 could create a floor of support for the stock price.

Order Flow Imbalances

Sudden changes in bid/ask size ratios may signal potential price shifts. If the bid size dramatically increases compared with the ask, it could foreshadow an upward price move.

Assessing Liquidity

The overall size of bids and asks helps traders evaluate how liquid a stock is. Larger sizes generally indicate better liquidity and ease of executing trades.

Order Types

 Let’s now explore how different types of market orders interact with the bid-ask size:

Market Orders

Most market orders are normally day orders, meaning if they are not filled by the end of the trading day they will expire unfilled. When you place a market order to buy, your order is filled at the ask price, and the number of shares available depends on the ask size. If the ask size is smaller than the number of shares you want to buy, your order may be partially filled at the current ask price, with the remaining portion filled at the next available ask price, potentially higher.

For example, if you place a market order to buy 1,500 shares and the ask size is only 1,000 shares, 1,000 shares will be bought at the current ask price. The remaining 500 shares will be filled at the next available ask price.

On the sell side, a market order is filled at the bid price, and the same principle applies. If the bid size is smaller than your sell order, your shares will be sold across multiple bid prices, possibly at lower prices than expected.

If you want the order to carry over to the next trading day and beyond, until it is filled, you must submit a “good ’til canceled” order.

Limit Orders

A limit order allows you to specify the maximum price you’re willing to pay when buying, or the minimum price you’re willing to accept when selling. Unlike market orders, limit orders are not guaranteed to be filled immediately. The bid-ask size is important for whether and when your limit order will be filled.

For instance, if you place a limit order to buy 2,000 shares at $50 but the ask size at that price is only 1,000 shares, only part of your order will be carried out. The remaining shares will stay unfilled unless more sellers are willing to meet your price. Likewise, if you place a limit sell order and the bid size is too small to absorb your entire order, only part of it will be executed.

Stop Orders

A stop order becomes a market order once the stop price is triggered. Since stop orders turn into market orders when triggered, the bid-ask size at the time of execution becomes crucial in determining the price you’ll receive. If a stop-loss order is triggered, but the bid size is small, the order could be filled at a much lower price than expected because there’s not enough demand at the stop price level.

Slippage and Bid-Ask Spreads

The bid-ask spread is the difference between the highest price that buyers are willing to pay (the bid) and the lowest price that sellers are willing to accept (the ask). While the spread gives you a view of market liquidity and transaction costs, the bid-ask size shows how many shares are available at each price.

Slippage refers to the difference between the expected price of a trade and the price at which it is actually executed. Bid-ask size plays a significant role in slippage, particularly with market orders during periods of low liquidity. When the bid or ask size is small, large orders may be executed at less favorable prices because of the limited availability of shares at the best bid or ask price.

What Does It Mean When the Bid Size Is Larger Than the Ask Size?

When the bid size is larger than the ask size, more orders to buy at a specific price are being placed compared with orders to sell at that same price.

Should I Buy At Bid or Ask Price?

If you want your order to fill immediately, you should place a market order that will fill at the lowest ask price. However, if you don’t want to pay that price, you should place a limit order at your desired price.

What Is the Difference Between Bid Size and Ask Size?

The bid size is the number of shares investors are trying to buy at a given price, while the ask size is the number of shares investors are trying to sell at a given price. Differences in the size amounts suggest future movements in stock prices. For example, if the number of asks is substantially greater than the number of bids, this suggests more investors are attempting to sell shares which may potentially drive the security’s price down.

The Bottom Line

Bid and ask sizes provide traders with real-time information about supply and demand for a stock. While large imbalances between bid and ask sizes can signal potential price moves, it’s crucial to interpret this data cautiously. Various order types, hidden liquidity, and rapid market changes can all influence the visible bid-ask picture.

Savvy investors use bid-ask size analysis as one tool among many, combining it with other technical indicators, fundamental analysis, and broader market context to make informed trading decisions. Understanding these nuances can help traders, but it’s important to remember that no single indicator can provide a complete picture of market sentiment or future price moves.

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