Can someone explain a stock's “bid” vs. “ask” price relative to “current” price?
"The current stock price you're referring to is actually the price of the last trade.  It is a historical price – but during market hours, that's usually mere seconds ago for very liquid stocks. Whereas, the bid and ask are the best potential prices that buyers and sellers are willing to transact at: the bid for the buying side, and the ask for the selling side.  But, think of the bid and ask prices you see as ""tip of the iceberg"" prices.  That is: The ""Bid: 13.20 x200"" is an indication that there are potential buyers bidding $13.20 for up to 200 shares.  Their bids are the highest currently bid; and there are others in line behind with lower bid prices.  So the ""bid"" you're seeing is actually the best bid price at that moment.  If you entered a ""market"" order to sell more than 200 shares, part of your order would likely be filled at a lower price. The ""Ask: 13.27 x1,000"" is an indication that there are potential sellers asking $13.27 for up to 1000 shares.  Their ask prices are the lowest currently asked; and there are others in line behind with higher ask prices.  So the ""ask"" you're seeing is the best asking price at that moment.  If you entered a ""market"" order to buy more than 1000 shares, part of your order would likely be filled at a higher price. A transaction takes place when either a potential buyer is willing to pay the asking price, or a potential seller is willing to accept the bid price, or else they meet in the middle if both buyers and sellers change their orders. Note: There are primarily two kinds of stock exchanges.  The one I just described is a typical order-driven matched bargain market, and perhaps the kind you're referring to. The other kind is a quote-driven over-the-counter market where there is a market-maker, as JohnFx already mentioned.  In those cases, the spread between the bid & ask goes to the market maker as compensation for making a market in a stock.  For a liquid stock that is easy for the market maker to turn around and buy/sell to somebody else, the spread is small (narrow).  For illiquid stocks that are harder to deal in, the spread is larger (wide) to compensate the market-maker having to potentially carry the stock in inventory for some period of time, during which there's a risk to him if it moves in the wrong direction.    Finally ... if you wanted to buy 1000 shares, you could enter a market order, in which case as described above you'll pay $13.27.  If you wanted to buy your shares at no more than $13.22 instead, i.e. the so-called ""current"" price, then you would enter a limit order for 1000 shares at $13.22.  And more to the point, your order would become the new highest-bid price (until somebody else accepts your bid for their shares.)  Of course, there's no guarantee that with a limit order that you will get filled; your order could expire at the end of the day if nobody accepts your bid." "Both prices are quotes on a single share of stock. The bid price is what buyers are willing to pay for it. The ask price is what sellers are willing to take for it. If you are selling a stock, you are going to get the bid price, if you are buying a stock you are going to get the ask price. The difference (or ""spread"") goes to the broker/specialist that handles the transaction." As others have stated, the current price is simply the last price at which the security traded. For any given tick, however, there are many bid-ask prices because securities can trade on multiple exchanges and between many agents on a single exchange. This is true for both types of exchanges that Chris mentioned in his answer. Chris' answer is pretty thorough in explaining how the two types of exchanges work, so I'll just add some minor details. In exchanges like NASDAQ, there are multiple market makers for most relatively liquid securities, which theoretically introduces competition between them and therefore lowers the bid-ask spreads that traders face. Although this results in the market makers earning less compensation for their risk, they hope to make up the difference by making the market for highly liquid securities. This could also result in your order filling, in pieces, at several different prices if your brokerage firm fills it through multiple market makers. Of course, if you place your order on an exchange where an electronic system fills it (the other type of exchange that Chris mentioned), this could happen anyway.  In short, if you place a market order for 1000 shares, it could be filled at several different prices, depending on volume, multiple bid-ask prices, etc. If you place a sizable order, your broker may fill it in pieces regardless to prevent you from moving the market. This is rarely a problem for small-time investors trading securities with high volumes, but for investors with higher capital like institutional investors, mutual funds, etc. who place large orders relative to the average volume, this could conceivably be a burden, both in the price difference across time as the order is placed and the increased bookkeeping it demands.  This is tangentially related, so I'll add it anyway. In cases like the one described above, all-or-none (AON) orders are one solution; these are orders that instruct the broker to only execute the order if it can be filled in a single transaction. Most brokers offer these, but there are some caveats that apply to them specifically. (I haven't been able to find some of this information, so some of this is from memory).  All-or-none orders are only an option if the order is for more than a certain numbers of shares. I think the minimum size is 300 or 400 shares.  Your order won't be placed until your broker places all other orders ahead of it that don't have special conditions attached to them.  I believe all-or-none orders are day orders, which means that if there wasn't enough supply to fill the order during the day, the order is cancelled at market close.  AON orders only apply to limit orders. If you want to replicate the behavior of a market order with AON characteristics, you can try setting a limit buy/sell order a few cents above/below the current market price.
Bid and ask prices are the reigning highest buy price and lowest sell price in the market which doesn't mean one must only buy/sell at thise prices. That said one can buy/sell at whatever price they so wish although doing it at any other price than the bid/ask is usually harder as other market participants will gravitate to the reigning bid/ask price. So in theory you can buy at ask and sell at bid, whether or not your order will be filled is another matter altogether. As stock prices have declined, the net worth of people has come down. Imagine owning a million shares of a stock worth $100/share. This is worth $100,000,000. Now, if the stock is suddenly trading at $50/share then some would say you have lost $50,000,000. The value of the stock is less. The uncertainty is always there as there are differences between one day's close and another day's open possibly. The sale price is likely to be near the last trade is what is being used here. If you place a market order to sell your stock, the price may move between the time the order is placed and when it is filled. There are limit orders that could be used if you want to control the minimum price you get though you give up that the order has to be filled as otherwise people could try to sell shares for millions of dollars that wouldn't work out well. (Note: I am omitting the currency units.  While I strongly suspect it's US$ I don't know from the chart.  The system works the same no matter what the currency.) A call or a put is the right to sell (put) or buy (call) shares at a certain price on a certain day. This is why you see a whole range of prices.  Not all possible stock values are represented, the number of possibilities has to be kept reasonable.  In this case the choices are even units, for an expensive stock they may be spaced even farther apart than this. The top of the chart says it's for June.  It's actually the third Friday in the month, June 15th in this case.  Thus these are bets on how the stock will move in the next 10 days. While the numbers are per share you can only trade options in lots of 100. The left side of the chart shows calls.  Suppose you sell a call at 19 (the top of the chart)  The last such trade would have gotten you a premium of 9.70 per share (the flip side of this is when the third friday rolls around it will most likely be exercised and they'll be paying you only 19 a share for a stock now trading at something over 26.)  Note the volume, bid and ask columns though--you're not going to get 9.70 for such a call as there is no buyer.  The most anybody is offering at present is 7.80 a share. Now, lets look farther down in the chart--say, a strike price of 30.  The last trade was only .10--people think it's very unlikely that FB will rise above 30 to make this option worthwhile and thus you get very little for being willing to sell at that price.  If FB stays at 26 the option will expire worthless and go away.  If it's up to 31 when the 15th rolls around they'll exercise the option, take your shares and pay you 30 for them.  Note that you already gave permission for the trade by selling the call, you can't back out later if it becomes a bad deal. Going over to the other side of the chart with the puts: Here the transaction goes the other way, come the 15th they have the option of selling you the shares for the strike price.  Lets look at the same values we did before.  19?  There's no trading, you can't do it. 30?  Here you will collect 3.20 for selling the put.  Come the 15th they have the right to sell you the stock for 30 a share.  If it's still 26 they're certainly going to do so, but if it's up to 31 it's worthless and you pocket the 3.20 Note that you will normally not be allowed to sell a call if you don't own the shares in question.  This is a safety measure as the risk in selling a call without the stock is infinite.  If the stock somehow zoomed up to 10,000 when the 15th rolls around you would have to come up with the shares and the only way you could get them is buy them on the open market--you would have to come up with a million dollars.  If there simply aren't enough shares available to cover the calls the result is catastrophic--whoever owns the shares simply gets to dictate terms to you.  (And in the days of old this sometimes happened.) You don't see Buying and Selling. You see Bid and Ask. Best Bid--Highest Price someone is willing to pay to buy a stock. Best Ask - Lowest price someone is willing to accept to sell a stock. As for your second question, if you can look up Accumulation/Distribution Algorithm and Iceberg Order, you will get basic idea. "Mathematically it's arbitrary - you could just as easily use the bid or the midpoint as the denominator, so long as you're consistent when comparing securities.  So there's not a fundamental reason to use the ask.  The best argument I can come up with is that most analysis is done from the buy side, so looking at liquidity costs (meaning how much does the value drop instantaneously purely because of the bid-ask spread) when you buy a security would be more relevant by using the ask (purchase price) as the basis. Meaning, if a stock has a bid-ask range of $95-$100, if you buy the stock at $100 (the ask), you immediately ""lose"" 5% (5/100) of its value since you can only sell it for $95." "Most of the time* you're selling to other investors, not back to the company. The stock market is a collection of bid (buy offers) and asks (sell offers). When you sell your stock as a retail investor at the ""market"" price you're essentially just meeting whatever standing bid offers are on the market.  For very liquid stocks (e.g. Apple), you can pretty much always get the displayed price because so many stocks are being traded. However during periods of very high volatility or for low-volume stocks, the quoted price may not be indicative of what you actually pay.  As an example, let's say you have 5 stocks you're trying to sell and the bid-side order book is 2 stocks for $105, 2 for $100, and 5 for $95. In this scenario the quoted price will be $105 (the best bid price), but if you accept market price you'll settle 2 for 105, 2 for 100, and 1 for 95. After your sell order goes through, the new quoted price will be $95. For high volume stocks, there will usually be so many orders near the midpoint price ($105, in this case) that you won't see any price slippage for small orders.  You can also post limit orders, which are essentially open orders waiting to be filled like in the above example. They ensure you get the price you want, but you have no way to guarantee they'll be filled or not.  Edit: as a cool example, check out the bitcoin GDAX on coinbase for a live example of what the order book looks like for stocks. You'll see that the price of bitcoin will drift towards whichever direction has the less dense order book (e.g. price drifts upwards when there are far more bids than asks.)" The Bid price is simply the highest buy price currently being offered and the Ask price simply the lowest sell price being offered. The list of Bid and Ask prices is called the market depth. When the Bid and Ask prices match then a sale goes through. When looking to sell you would generally look at both the Bid and Ask prices. As a seller you want to be matched with the Bid price to get a sale, but you also need to check the current list of Ask prices. If the price you want to sell at is too high you will be placed down the Ask price list, and unless the price moves up to match your sell price you will not end up selling. On the other-hand, if your price to sell is too low and in fact much lower than the current lowest sell price you may get a quick sale but maybe at a lower price than you could have gotten. Similarly, when looking to buy, you would generally also look at both the Bid and Ask prices. As a buyer you want to be matched with the Ask price to get a sale, but you also need to check the current list of Bid prices. If the price you want to buy at is too low you will be placed down the Bid price list, and unless the price moves down to match your buy price you will no end up buying. On the other-hand, if your price to buy is too high and in fact much higher than the current highest buy price you may get a quick purchase but maybe at a higher price than you could have gotten. So, whether buying or selling, it is important to look at and consider both the Bid and Ask prices in the market depth. A stock's price does not move in a completely continuous fashion.  It moves in discrete steps depending on who is buying/selling at given prices. I'm guessing that by opening bell the price for buying/selling a particular stock has changed based on information obtained overnight. A company's stock closes at $40.  Overnight, news breaks that the company's top selling product has a massive defect.  The next morning the market opens.  Are there any buyers of the stock at $40?  Probably not.  The first trade of the stock takes place at $30 and is thus, not the same as the previous day's close. The IPO price is set between the underwriters and the specialist in the NASDAQ. There are a lot of complexities on how to get to this price, everyone is trying to pull to their own side. In the Facebook example, the price was $38 for all IPO participants. Then, once the IPO went to the secondary market, the bid/ask drove the pricing.  At the secondary market the price is driven by the demand and offer of the stock.  That is, people who wanted to buy right after the IPO likely drove the initial price up. "Why would people sell below the current price, and not within the range of the bid/ask? There are many scenarios where this is deliberate but all of them boil down to the fact that the top level's bid doesn't support the quantity you're trying to sell (or is otherwise bogus[1]). One scenario as an example: You're day-trading both sides but at the end of the day you accumulated a rather substantial long position in a stock.  You don't want to (or aren't allowed to[2]) be exposed overnight, however.  What do you do? You place an order that is highly likely to go through altogether.  There's several ways to achieve that but a very simple one is to look at the minimum bid level for which the bid side is willing to take all of your shares, then place a limit order for the total quantity at that price.  If your position doesn't fit into the top level bid that price will well be lower than the ""current"" bid. Footnotes: [1] Keyword: quote stuffing [2] Keyword: overnight margin (aka positional margin, as opposed to intraday margin), this is highly broker dependent, exchanges don't usually distinguish between intraday and overnight margins, instead they use the collective term maintenance margin" "It's good to ask this question, because this is one of the fundamental dichotomies in market microstructure. At any time T for each product on a (typical) exchange there are two well-defined prices: At time T there is literally no person in the market who wants to sell below the ask, so all the people who are waiting to buy at the bid (or below) could very well be waiting there forever.  There's simply no guarantee that any seller will ever want to part with their product for a lesser price than they think it's worth. So if you want to buy the product at time T you have a tough choice to make: you get in line at the bid price, where there's no guarantee that your request will ever be filled, and you might never get your hands on the product you decide that owning the product right now is more valuable to you than (ask - bid) * quantity, so you tell the exchange that you're willing to buy at the ask price, and the exchange matches you with whichever seller is first in line Now, if you're in the market for the long term, the above choice is completely immaterial to you.  Who cares if you pay $10.00 * 1000 shares or $10.01 * 1000 shares when you plan to sell 30 years from now at $200 (or $200.01)? But if you're a day trader or anyone else with a very short time horizon, then this choice is extremely important: if the price is about to go up several cents and you got in line at the bid (and never got filled) then you missed out on some profit if you ""cross the spread"" to buy at the ask and then the price doesn't go up (or worse, goes down), you're screwed.  In order to get out of the position you'll have to cross the spread again and sell at at most the bid, meaning you've now paid the spread twice (plus transaction fees and regulatory fees) for nothing. (All of the above also applies in reverse for selling at the ask versus selling at the bid, but most people like to learn in terms of buying rather than selling.)" Stock price is determined by what's being asked for it, and what's being paid for it. The reported price is either a recent average, or is the last price at which a sale actually took place, depending on which you've asked for. Limit orders are an agreement between you and your brokerage, and have no direct effect on price. When and if their condition is triggered and the transaction takes place, the transaction is what's significant. A stock market is just that, a market place where buyers and sellers come together to buy and sell shares in companies listed on that stock market. There is no global stock price, the price relates to the last price a stock was traded at on a particular stock market. However, a company can be listed on more than one stock exchange. For example, some Australian companies are listed both on the Australian Stock Exchange (ASX) and the NYSE, and they usually trade at different prices on the different exchanges. Also, there is no formula to determine a stock price. In your example where C wants to buy at 110 and B wants to sell at 120, there will be no sale until one or both of them decides to change their bid or offer to match the opposite, or until new buyers and/or sellers come into the market closing the gap between the buy and sell prices and creating more liquidity. It is all to do with supply and demand and peoples' emotions. "Re: A trader when buying needs to buy at the ask price and when selling needs to sell   at the bid price. So how can a trade happen 'in between' the bid and ask? Saying the trade can happen ""in between"" the bid & ask is simplistic.  There is a time dimension to the market.  It's more accurate to say that an order can be placed ""in between"" the current best bid & ask (observed at time T=0), thus establishing a new level for one or the other of those quoted prices (observed at time T>0). If you enter a market order to buy (or sell), then yes, you'll generally be accepting the current best ask (or best bid) with your order, because that's what a market order says to do: Accept the current best market price being offered for your kind of transaction.  Of course, prices may move much faster than your observation of the price and the time it takes to process your order – you're far from being the only participant. Market orders aside, you are free to name your own price above or below the current best bid & ask, respectively. ... then one could say that you are placing an order ""in between"" the bid and ask at the time your order is placed.  However – and this is key – you are also moving one or the other of those quoted prices in the process of placing your above-bid buy order or your below-ask sell order. Then, only if somebody else in the market chooses to accept your new ask (or bid) does your intended transaction take place. And that transaction takes place at the new ask (or bid) price, not the old one that was current when you entered your order. Read more about bid & ask prices at this other question: (p.s. FWIW, I don't necessarily agree with the assertion from the article you quoted, i.e.: ""By looking for trades that take place in between the bid and ask, you can tell when a strong trend is about to come to an end.""  I would say: Maybe, perhaps, but maybe not.)" Depends on when you are seeing these bids & asks-- off hours, many market makers pull their bid & ask prices entirely.  In a lightly traded stock there may just be no market except during the regular trading day.