1
Bid and ask
The bid is the highest displayed buying price; the ask is the lowest displayed selling price.
Lesson · Volume and Order Flow
Bid, Ask, Spread, and Order Types
Read a quote, name the spread, and choose between a market and a limit order by what each guarantees and what it costs.
Core concepts
What to understand
Keep the interpretation direct: participation, aggressive side, and actual price progress.
2
Spread
The distance between the best bid and best ask.
3
Market vs limit
Market orders prioritize execution; limit orders constrain price but can remain unfilled.
Interactive lab
Change the market conditions
Use the controls and read the “What the market is doing” explanation after each change.
Bid, Ask, Spread, and Order Types Lab
Synthetic educational data · no live market connection
MARKET DATA
Reading process
Follow the reading steps
Do not jump from one number to a trade. Describe the evidence first.
Read the quote
Identify best bid, best ask, and spread.
Choose urgency
Decide whether immediate execution or price control matters more.
Estimate impact
Larger marketable orders may consume several price levels.
Knowledge check
Check your interpretation
Select one answer for each question. Feedback appears immediately.
1. An aggressive buy order normally executes against:
A marketable buyer takes the lowest available selling price.
2. What does a limit buy order guarantee?
It will not execute above the limit, but sellers may never trade there.
3. A wide bid-ask spread generally means:
Crossing a wider spread creates a larger immediate cost.
4. Best bid 99.99, best ask 100.01, with 300 offered at 100.01 and 600 at 100.02. A market buy for 500: what are the spread and the average fill price?
Spread = 100.01 − 99.99 = 0.02. The buy takes 300 at 100.01 and 200 at 100.02: (30,003 + 20,004) ÷ 500 = 100.014.
Practical rules
- A market order does not guarantee the displayed price.
- A limit order does not guarantee execution.
- Include spread and depth in trade costs.
Common mistakes
- Assuming the last price is currently executable.
- Using market orders in thin books without checking depth.
- Placing a limit order and assuming it filled.
References
Official reading
The lab is simplified; these sources provide the underlying market and execution definitions.
Investor.gov · Types of Orders
Official explanation of market, limit, and stop orders and their execution trade-offs.
CME Group · Market Makers vs. Market Takers
Official overview of liquidity providers and traders seeking immediacy.