What is a 'Bid Size'

The bid size number of shares being offered for purchase at a specified bid price that a buyer is willing to purchase at that bid price.

For example, if an investor wants to buy 200 shares of Company ABC at $10 per share, the bid size is 200 shares. A stock exchange would then quote this bid size in the hundreds, so the bid size for Company ABC would be two. If the bid size was 500 shares, the bid size quote would be five.

BREAKING DOWN 'Bid Size'

Bid size is the opposite of ask size. Ask size is the amount of a security that a company is offering to sale. Bid size and ask size are thought to have a relationship, implying that that if bid sizes are higher than ask sizes, then there may be a high demand for the stock.

The bid size represents how much the market is willing to buy at the bid price. Retail investors and traders commonly sell their shares at the bid and buy at the ask. This is known as taking liquidity. When an investor places a market order to sell a stock, it is immediately sold at the inside bid price. Market makers and specialists buy on the bids and sell on the asks. They are required to provide liquidity.

Level 2

Due to the multitude of fragmented exchanges and electronic communications networks (ECN), the Securities and Exchange Commission (SEC) established Regulation National Market System (NMS) in 2007. This requires all the ECNs and smaller exchanges to report the National Best Bid Offer (NBBO) to the major exchanges like Nasdaq and the New York Stock Exchange (NYSE). Brokers are required to honor the NBBO for their clients. A level 2 screen provides the depth of bids and asks which include both price and size. The highest bid price and size and lowest ask price and size is displayed at the top of the queue. This is the NBBO that is shown on level 1 quotes. From the top down, the next best bid and ask are displayed and so forth for each price level. Most traders opt for a level 2 quote feed to plan out exit strategies on positions.

Hidden and Reserve Bids

Many ECNs offer the option to bid the bid price and size, making it invisible on both level 1 and level 2 quote feeds. The purpose is to cloak the motive of the seller and keep market impact to a minimum. A reserve order shows a smaller size while secretly trying to buy a larger amount. Often, a trader may place a bid size of just 100 shares but may want to actually buy 2,000 shares, which is the reserve order. The goal is the shake out the weaker longs that may panic to exit the position based on a small bid size, which indicates fleeting demand.

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RELATED FAQS
  1. What do the bid and ask prices represent on a stock quote?

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  2. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    These numbers are called the bid and ask sizes, and represent the aggregate number of pending trades at the given bid 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. How do day traders capture profits from the difference between bid and ask prices?

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  5. Why are the bid and ask quotes usually so far away from each other in after-hours ...

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