Are BID and ASK the minimum and maximum?
So in your screenshot, someone or some group of someones is willing to buy 3,000 shares at $3.45, and someone or some group of someones is willing to sell 2,000 shares at 3.88. Without getting in to the specific mechanics, you can place a market buy order for 10 (or whatever number) shares and it will probably transact at $3.88 per share because that's the lowest price for which someone will currently sell their shares. As a small fish, you can generally ignore the volume notations in the bid/ask quotes.
The price of a share has two components: Bid: The highest price that someone who wants to buy shares is willing to pay for them. Ask: The lowest price that someone who has a share is willing to sell it for. The ask is always higher than the bid, since if they were equal the buyer and seller would have a deal, make a transaction, and that repeats until they are not equal. For stock with high volume, there is usually a very small difference between the bid and ask, but a stock with lower volume could have a major difference. When you say that the share price is $100, that could mean different things. You could be talking about the price that the shares sold for in the most recent transaction (and that might not even be between the current bid and ask), or you could be talking about any of the bid, the ask, or some value in between them. If you have shares that you are interested in selling, then the bid is what you could immediately sell a share for. If you sell a share for $100, that means someone was willing to pay you $100 for it. If after buying it, they still want to buy more for $100 each, or someone else does, then the bid is still $100, and you haven't changed the price. If no one else is willing to pay more than $90 for a share, then the price would drop to $90 next time a transaction takes place and thats what you would be able to immediately sell the next share for. This is copying my own answer to another question, but this is definitely relevant for you: A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). Going long, as you may have guessed, is the opposite of going short. Instead of betting that the price will go down, you buy shares in the hope that the price will go up. So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Similarly, the same is true in the reverse if you are going long. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible. A bid is an offer to buy something on an order book, so for example you may post an offer to buy one share, at $5. An ask is an offer to sell something on an order book, at a set price. For example you may post an offer to sell shares at $6. A trade happens when there are bids/asks that overlap each other, or are at the same price, so there is always a spread of at least one of the smallest currency unit the exchange allows. Betting that the price of an asset will go down, traditionally by borrowing some of that asset and then selling it, hoping to buy it back at a lower price and pocket the difference (minus interest). So, let's say as per your example you borrow 100 shares of company 'X', expecting the price of them to go down. You take your shares to the market and sell them - you make a market sell order (a market 'ask'). This matches against a bid and you receive a price of $5 per share. Now, let's pretend that you change your mind and you think the price is going to go up, you instantly regret your decision. In order to pay back the shares, you now need to buy back your shares as $6 - which is the price off the ask offers on the order book. Because of this spread, you have lost money. You sold at a low price and bought at a high price, meaning it costs you more money to repay your borrowed shares. So, when you are shorting you need the spread to be as tight as possible. Yes, but also note each exchange have rules that states various conditions when the market maker can enlarge the bid-ask (e.g. for situations such as freely falling markets, etc.) and when the market makers need to give a normal bid-ask. In normal markets, the bid-asks are usually within exchange dictated bounds.  MM's price spread can be larger than bid-ask spread only when there are multiple market makers and different market makers are providing different bid-asks. As long as the MM under question gives bid and ask within exchange's rules, it can be fine. These are usually rare situations. One advice: please carefully check the time-stamps. I have seen many occasions when tick data time-stamps between different vendors are mismatched in databases whereas in real life it isn't.  MM's profits not just from spreads, but also from short term mean-reversion (fading). If a large order comes in suddenly, the MM increases the prices in one direction, takes the opposite side, and once the order is done, the prices comes down and the MM off-loads his imbalance at lower prices, etc. Limit orders are generally safer than market orders. Market orders take whatever most-favorable price is being offered. This can be especially dangerous in highly volatile stocks which have a significant spread between the bid and ask. That being said, you want to be very careful that you enter the price you intend into a limit order. It is better to be a bit slower at entering your orders than it is to make a terrible mistake like the one you mention in your question. 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. I don't think you're missing anything. Many modern trading systems actually warn you when trying to enter a market order, asking if you are sure that you wouldn't prefer to set a limit. I fully agree with you that it is usually just better to define a limit even 20% higher than just doing a market trade. Let me give you some examples when you still might prefer to use a market order instead of a limit: But even in those two examples a (wide) limit order might just be the safer thing to do.  So, what it really comes down to is speed: A market order has no other criterias to be defined, is thus entered faster and saves you a few seconds that might be crucial. You can ask for 305rs, but as long as shares are available at lower prices you won't sell. Only when your ask becomes the lowest available price will someone buy from you. See many past questions about how buyers and sellers are matched by the market. "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." A limit order is simply an order to buy at a maximum price or sell at a minimum price. For example, if the price is $100 and you want to sell if the price rises to $110, then you can simply put a limit order to sell at $110. The order will be placed in the market and when the price reaches $110 your order will be executed. If the price gaps at the open to $111, then you would end up selling for $111. In other words you will get a minimum of $110 per share. A stop limit order is where you put a stop loss order, which when it gets triggered, will place a limit order in the market for you. For example, you want to limit your losses by placing a stop loss order if the price drops to $90. If you chose a market order with your stop loss as soon as the price hits $90 your stop loss would be triggered and the shares would sell at the next available price, usually at $90, but could be less if the market gaps down past $90. If on the other hand you placed a limit order at $89.50 with your stop loss, when the stop loss order gets triggered at $90 your limit order will be placed into the market to sell at $89.50. So you would get a minimum of $89.50 per share, however, if the market gaps down below $89.50 your order will be placed onto the market but it won't sell, unless the price goes back to or above $89.50. Hope this helps. The dynamics of different contracts and liquidity can be quite different on the last day on the month and for intraday trade make sure you use bid-ask data as opposed to historical trades.  I'm not saying whether it works or not, but im just giving you ideas to improve your testing. "&gt; Is your time frame any longer than intraday? I imagine you wouldn't want to carry that risk overnight if you're a broker or selling a route..  Most brokers these days are executing in an agent capacity, so they're never holding the risk. They execute what they can, the customer keeps what they can't.   &gt; So, say for instance you join a bid a few levels down, you aren't really get filled, you start hitting the offer and eventually you realize you're competing with someone for the shares offered, so you take out the price level and bid on all the exchanges so that you're first on the bid at that level, then repeat until someone that can match your appetite starts to fill you on the bid?  Lifting* the offer (hit bids, lift offers). And I suppose that's a stategy, albeit a somewhat simple one. Passive routing strategies differ from firm to firm and algo to algo. What is your customer going to think if you bid up a new price level only for the stock to rally completely away from it?  &gt; Right, so say you need 100k shares, there are 10k offered at 9.98, 25k offered at 9.99, and 65k at 10.00, you might just enter an intermarket sweep order of 100k @ 10 limit and hope that you can get most of the shares off before everyone can cancel? I imagine there has to be a lot of bidding it up to attract sellers and then letting people take out your bids all day...  ""Bidding it up to attract sellers"" sounds an awful lot like [spoofing](https://en.wikipedia.org/wiki/Spoofing_(finance\)), just a heads up. Sure though, if you want to tighten a spread or create new levels with aggressive passive liquidity, that is a strategy. The same caveats as I mentioned above apply.  Anyway, if market impact isn't an issue for the customer, sure, take liquidity until you're filled. Don't forget about getting good size done in the opening and closing auctions (MOO/MOC). If you're too passive you risk the market moving away from you and pissing off the customer. If you're too aggressive you risk moving the market too much and pissing off the customer." "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.)" I think it is clear that this has a lot to do with keeping salaries down.    The company has a maximal possible salary limit (i.e. the most they would be willing and able to pay) for what you do.  You have a minimal possible salary.  Both of you know that the current salary is in between the two figures.  For negotiations it would be very useful for you to know the maximal possible salary (i.e. the utmost the company would be willing to pay you to stay and continue); the company on the other hand is obliged to keep costs low and hence would like to know your new minimum acceptable salary so they won't make an offer too high.    But if you knew all salaries of people around you -- you could make a better guess about your own maximal possible salary.  You probably would over-estimate it because we all tend to over-estimate our own relevance and competence, but it would be a better informed guess at least.  The company would hence give up an informational advantage which could lead them to have higher costs.  So they will ask you how much you were offered at the competitor (i.e. they will be close to your new minimum acceptable salary) while trying to prevent you from learning anything about the maximal possible salary.. "- In a quote driven market, must every investor trade with a market        maker? In other words, two parties that are both not market makers        cannot trade between themselves directly? In a way yes, all trades go through a market maker but those trades can be orders put in place by a ""person"" IE: you, or me. - Does a quote driven market only display the ""best"" bid and ask        prices proposed by the market makers? In other words, only the        highest bid price among all the market makers is displayed, and        other lower bid prices by other market makers are not? Similarly,        only the lowest ask price over all market makers is displayed, and        other higher ask prices by other market makers are not? No, you can see other lower bid and higher ask prices. - In a order-driven market, is it meaningful to talk about ""the current stock price"", which is the price of last transaction? Well that's kind of an opinion. Information is information so it won't be bad to know it. Personally I would say the bid and ask price is more important. However in the real world these prices are changing constantly and quickly so realistically it is easier to keep track of the quote price and most likely the bid/ask spread is small and the quote will fall in between. The less liquid a security is the more important the bid/ask is. -- This goes for all market types. - For a specific asset, will there be several transactions happened at    the same time but with different prices? Today with electronic markets, trades can happen so quickly it's difficult to say. In the US stock market trades happen one at a time but there is no set time limit between each trade. So within 1 second you can have a trade be $50 or $50.04. However it will only go to $50.04 when the lower ask prices have been exhausted.   - Does an order driven market have market makers?  By definition, no. - What are some examples of quote driven and order driven financial markets, in which investors are commonly trading stocks and derivatives, especially in U.S.? Quote driven market: Bond market, Forex. Order driven market: NYSE comes from an order driven market but now would be better classified as a ""hybird market"" Conclusion: If you are asking in order to better understand today's stock markets then these old definitions of Quote market or Order market may not work. The big markets in the real world are neither. (IE: Nasdaq, NYSE...) The NYSE and Nasdaq are better classified as a ""hybird market"" as they use more then a single tactic from both market types to insure market liquidity, and transparency. Markets these days are strongly electronic, fast, and fairly liquid in most cases. Here are some resources to better understand these markets: An Introduction To Securities Markets The NYSE And Nasdaq: How They Work Understanding Order Execution"