Inside Quote

DEFINITION of 'Inside Quote'

The best bid and ask prices offered to buy and sell a security amongst the competing market makers. The inside quote is the prices at which at which market order will be executed. If it is a sell order, a market order will be executed at the inside bid price. For a buy order, it will be executed at the inside ask price.

BREAKING DOWN 'Inside Quote'

Many retail investors do not realize that the price of a security displayed is actually only the price at which the last trade occurred. If the market for a security is highly liquid and trading is frequent, then this may be a good indication of the current fair market value of the security. However, in less liquid securities, it is important to consider the inside quotes at a given moment, since the last trade may have taken place some time ago, and thus may not be indicative of the current market prices. When trading a less liquid security, traders often use a "limit order to avoid being surprised by the price at which the order executes."