Price Improvement

DEFINITION of 'Price Improvement'

Attaining a higher bid price, if you are selling a stock, or a lower ask price, if you are buying a stock, than the price quoted at the time your order was placed.

BREAKING DOWN 'Price Improvement'

You will often read in brokerage marketing pitches that price improvement is an opportunity and not a guarantee. Although most brokerages purport "fighting for that last 1/16" there is no guarantee of this actually happening.

RELATED TERMS
  1. Bid Price

    The price a buyer is willing to pay for a security. This is one ...
  2. Make A Market

    An action whereby a dealer stands by ready, willing and able ...
  3. Firm Quote

    A price quote on a security, made by a dealer or market maker, ...
  4. Ask Size

    The amount of a security that a market maker is offering to sell ...
  5. Best Bid

    The highest quoted bid for a particular trading instrument among ...
  6. Best Ask

    The lowest quoted offer price among all those offered by competing ...
Related Articles
  1. Active Trading Fundamentals

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  2. Term

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  3. Active Trading Fundamentals

    Short Selling: What Is Short Selling?

    Investopedia Explains: The fundamentals of short selling and the difference between going long or short on an investment.
  4. Investing Basics

    Opening Your First Brokerage Account

    Learn what steps you should take before you open your first brokerage account.
  5. Options & Futures

    Understanding Gold Quote Prices

    Willing to trade gold but puzzled by gold price quotes and terminology? Investopedia explains how to read gold price quotes.
  6. Investing Basics

    Is it Risky to Invest in Options?

    Investing with options can be a great strategy, but you need to do your research first or the risks can outweigh the benefits.
  7. Options & Futures

    The 4 Ways To Buy And Sell Securities

    Know the four main avenues of buying and selling investment instruments.
  8. Options & Futures

    Don't Let Brokerage Fees Undermine Your Returns

    Smart investors don't give away more money than necessary in commissions and fees. Find out how to save.
  9. Investing Basics

    How To Manage Your Company Stock

    If you have company stock, it can be hard to know what to do with it. Here's what you should know.
  10. Fundamental Analysis

    Hot or Not: Single Stocks in Your Portfolio

    It can be rewarding to invest in well-performing companies, but single stocks can present some downside for your portfolio, too. Here's why.
RELATED FAQS
  1. I don't understand how a stock has a trading price of 5.97, but when I buy it I have ...

    It might seem logical that the last traded price of a security is the price at which it would currently be trading, but this ... Read Answer >>
  2. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  3. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed ...

    Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people ... Read Answer >>
  4. What's the difference between a stop and a limit order?

    Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Answer >>
  5. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
  6. What is the difference between a quote driven market and an order driven one?

    The difference between these two market systems lies in what is displayed in the market in terms of orders and bid and ask ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center