What Are the Bid and Ask Prices?
Bid and ask price represents the highest amount a buyer will pay, and the lowest amount a seller will accept for a tradable financial instrument. These are the numbers people refer to when talking about "stock prices".
When you buy, you pay the ask price. When you sell, you receive the bid price.
Which Price Do You Pay When You Buy or Sell?
When you buy an asset, you pay the ask price, and when you sell an asset, you receive the bid price. The difference between the two is called bid-ask spread.
How to Read a Stock Quote: Bid, Ask, Size and Last Price
There are a few things you need to pay attention to.
Last price is the price of the most recent completed trade. Please note that the last price is not the price you will trade at, since the price could already move by now. If you are acting on a fast-moving stock, the last price you saw might be obsolete at the moment you click buy or sell.
Bid price is the highest price a buyer is currently willing to pay. If you want to sell immediately (a market sell order), this is roughly the price you'll get.
Ask price (or "offer") is the lowest price a seller is currently willing to accept. If you want to buy immediately (a market buy order), this is roughly the price you'll pay.
Size is the number of shares available at the bid or ask. Quotes often show it as bid size × ask size. For example: a quote like "50.00 x 50.05, 10 x 20" means the highest buying price ($50.00) with a demand for 1,000 shares (10 lots) is matched against the lowest selling price ($50.05) with an available supply of 2,000 shares (20 lots).
Size was historically written in "round lots" of 100 shares, so a size of 5 can mean 500 shares. Many brokers now show actual share counts, so check with your broker.
What Is the Bid-Ask Spread?
Spread is the difference between bid price and ask price. The wider the spread at any moment, the harder it will be to match sellers and buyers. Stocks with wider spread have lower level of liquidity, since it will take longer time to sell than stocks with narrower spread.
How to Calculate the Spread in Dollars and as a Percentage
Subtract the bid from the ask:
Spread ($) = Ask − Bid
For example:
(Bid $50.00, Ask $50.03)
Spread = 50.03 − 50.00 = $0.03
As a percentage
Divide the dollar spread by a reference price and multiply by 100. Usually, a midpoint is used between the bid and ask:
Midpoint = (Bid + Ask) / 2
Spread (%) = (Ask − Bid) / Midpoint × 100
Continuing the example:
Why the percentage matters
When you are talking about "spread", the dollar spread alone can mislead, because a number like $0.03 will mean different portion at different prices.
Stock | Bid | Ask | Spread ($) | Spread (%) |
|---|
A | $50.00 | $50.03 | $0.03 | 0.06% |
B | $2.00 | $2.03 | $0.03 | 1.49% |
C | $400.00 | $400.10 | $0.10 | 0.025% |
Stock B has the same dollar spread as Stock A but costs roughly 25 times more in percentage terms. Stock C has a bigger dollar spread than either but is the cheapest to trade relative to its price. This impacts your calculation when choosing which stock to trade.
Why Spreads Are Narrow for Some Stocks and Wide for Others
If a stock is being bought and sold by so many people at a time, it will generally have narrow spread and high "liquidity", because many people are agreeing to buy and sell at certain price, every minute. There are many reasons why: trading volume, share price, volatility/news, and market hours (pre-market and after-hours spreads are wider).
Bid vs Ask in Practice: Market Orders vs Limit Orders
Market orders
A market order is basically saying "fill me now at the best available price."
Pros: Fast and nearly always filled. Cons: You pay the full spread, and you don't control the price. If the quote moves between when you click and when the order reaches the market, you get whatever is available.
Limit orders
A limit order says "fill me only at this price or better." This is a common practice, since it gives you control. There is no surprise on how much you will pay or accept whenever a trade happens.
Pros: Price control, and a chance to save some or all of the spread. Cons: No guarantee of a fill. If the market never reaches your price, the order just sits there.
Example
Quote: Bid $50.00 x 300, Ask $50.03 x 500. You want to buy 200 shares.
Order | What happens | Likely result |
|---|
Market buy | Takes the 200 shares offered at the ask | Fills at about $50.03 |
Limit buy at $50.03 | Same as the ask, so it fills immediately | Fills at $50.03 or better |
Limit buy at $50.01 | Sits inside the spread as the new best bid, improving the quote | Fills only if a seller comes down to $50.01 |
Limit buy at $50.00 | Joins the queue at the bid behind other buyers | May wait a long time, or never fill |
Placing the limit at $50.01 saves you $0.02 per share (about $4 on 200 shares) if it fills, but you risk the price rising away from you.
When to place Market orders:
The stock is highly liquid with a tight spread, everyone is selling and buying every second.
Buying or selling right now matters more than a cent or two.
When to place Limit orders:
The spread is wide or the stock is not traded as often.
The market is volatile, or it's pre-market or after-hours.
You're trading a large size relative to what's displayed.
You have a specific price in mind that fits your goal and strategy.
Things to Consider
Market orders in fast markets: Prices can gap, so you may fill far from the last price you saw. This can be risky when the market situation is hot and volatile.
Limit orders and missed moves: A stock can run without you if your limit is too conservative.
Partial fills: A limit order may fulfill only part of your shares if size at that price runs out.
Stop orders: A stop-loss becomes a market order once triggered, so you may sell well below the stop price.
Bid and Ask When You Invest With Dollars or Fractional Shares
Fractional shares let you buy a fraction, instead of buying whole shares. The bid and ask still apply, but it will be different.
How fractional orders typically work
Most brokers don't send a fractional order straight to the public market. Instead, they will:
Aggregate orders from many customers, or fill them from the firm's own inventory.
Execute the combined whole-share order on the market (or internally).
Allocate the fractional pieces back to each customer.
Because of this, you generally can't see or pick a bid or ask for your fractional piece. Instead, the broker determines your price.
What price do you actually get?
Your broker should disclose which method they use to determine price. There are several ways:
Reference to the market quote: Your price is based on the prevailing bid, ask, or midpoint at the time of execution, sometimes with a small markup or markdown.
Batched execution: Orders collected over a window are filled together at one price, which may be a few seconds to several minutes after you submit.
Next-open or scheduled execution: Some brokers only fill fractional orders at set times, such as once or a few times a day.
Make sure you know what kind of pricing method you get from your broker.
Example
You invest $100 in a stock quoted Bid $50.00 / Ask $50.03.
The difference grows with wider spreads or volatile moments.
Order type limitations
Fractional trading is typically restricted:
Market orders only at many brokers, so you can't set a limit price.
Some brokers allow limit orders on fractional shares, but support varies.
Extended-hours trading is often unavailable for fractional orders.
Selling a fractional share may follow the same rules, with execution timing set by the broker.
Transferring fractional shares to another broker is often not possible, so you have to confirm this.
Quick Checklist Before You Place a Trade
1. Confirm the basics
Ticker and security: Is this the right symbol? Similar tickers (and ETFs vs. the underlying stock) are easy to mix up.
Buy or sell: Double-check the direction.
Quantity or dollar amount: Watch for extra zeros and for shares vs. dollars.
Account: Make sure you're trading in the intended account.
2. Read the quote
Bid, ask, and last: You will likely buy near the ask and sell near the bid price.
Spread: A wide spread means higher cost.
Size: Is there enough share to fill your need?
Real-time or delayed: Confirm the quote is live.
3. Pick the right order type
Limit order or Market order
Set your limit price: the most you'll pay, or the least you'll accept.
Choose the duration: Day order, or stand until cancelled. A forgotten good-till-cancelled order can fill weeks later at a price you no longer want.
4. Check the market conditions
Time of day: The first and last minutes of the session, and pre-market and after-hours, tend to have wider spreads and sharper moves.
News or events: Earnings, economic reports, or breaking headlines can make prices gap.
Volume: Compare today's volume to the average. Unusual activity deserves a closer look.
5. Know your costs
Spread cost: Your real entry price is closer to the ask than the last price.
Commissions and fees: Sometimes "commission-free" brokers may have other charges.
Taxes: Tax treatment depends on where you live, so check your local rules.
6. Check the size
Position size: How much of your portfolio does this represent? Are you concentrating too much in one holding?
Worst case: If the price dropped 20% to 30%, could you tolerate it?
Exit plan: Decide in advance when you'd sell, whether for a gain or a loss.
7. Review before submitting
Conclusion
The bid is the most a buyer will pay right now, the ask is the least a seller will accept, and the gap between them is called the spread. Spread is a cost you pay every time you trade at the market. Other things you want to keep in mind are:
You buy near the ask and sell near the bid, not at the last traded price.
Judge the spread as a percentage, not in dollars. A $0.03 spread is small on a $50 stock and large on a $2 stock.
Match the order type to the conditions. Market orders favor speed in liquid stocks with tight spreads; limit orders give you price control when spreads are wide, volume is thin, or prices are moving fast.
This article is for educational purposes only and is not investment advice.
