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What Is Bid Size?
Let me explain what bid size means in trading. It's the quantity of a security that investors are willing to buy at a specific bid price. When you're looking at level 1 quotes on your trading screen, the bid size tells you how many shares people are ready to purchase at the best available bid price.
Key Takeaways
- Bid size is the quantity of a security investors want to buy at a specified bid price.
- It's stated in board lots, each representing 100 shares, so a bid size of four means 400 shares.
- Bid sizes matter because they show the demand and liquidity for a security.
- Level 1 quotes only display the bid size for the best bid price.
- Level 2 quotes reveal depth of market with multiple layers of bid prices and sizes.
How Bid Size Works
You see bid sizes displayed in board lots, each one standing for 100 shares. For instance, if a level 1 quote lists a bid price of $50 with a bid size of five, that means the top offer from buyers is $50 per share for 500 shares. If you own that stock, you could sell up to 500 shares at that price.
Bid size is the flip side of ask size, which is the amount of a security investors are offering to sell at the ask price. You can interpret the differences between bid size and ask size as the supply and demand balance for that security.
Beyond the best bid, there are usually more bids at lower prices, each with their own sizes. You need level 2 market quotations to see this extra information.
Real World Example of Bid Size
Take our earlier security as an example. There might be a bid size of 10, meaning 1,000 shares, at a bid price of $49. If you want to sell 1,500 shares, you could get $25,000 for the first 500 at $50, plus $49,000 for the next 1,000 at $49, totaling $74,000.
To access data on bids below the best one, you need level 2 quotes, which are often a premium feature in brokerage accounts.
This depth of market information helps you understand the liquidity structure. In our case, after selling 1,500 shares, the next bid might drop to $40. Selling more than that could tank the price sharply, so you might hold off to get a better deal and protect the value of your remaining shares.
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