Understanding the Market

[MarkSA]

I believe I understand most of the basics of the Bid/Ask, but I've been watching L2 screens for certain stocks over the last few days and a few questions have come to mind.

If I wish to buy a stock immediately (Market Order), I pay the Ask price assuming all of it can be filled at that price. If I wish to sell a stock immediately (Market Order), I pay the Bid price.

Where does the actual price of the stock fit into that, though? I often see cases where the price of a stock is exactly the same as the bid price (for instance), yet from looking at the L2 screen, I can't understand why. There doesn't appear to be more buying pressure than selling pressure in that case. What pushes the actual price of the stock more toward the Bid than the Ask or vice versa? And is the actual stock price really good for anything besides a progress marker for the price of a stock, since Buys/Sells rarely take place at it?

In addition, there have been times when i've watched the L2 screen for certain low volume stocks during the day and there doesn't appear to be any Bid/Ask offers. What happens if I placed a market order under this circumstance? Does it open the door wide for someone to come along and place an opposite Limit order giving me a gouging price for it? Are there any limits or protections for just how gouged I can be? I've read something about Bid/Ask prices needing to be within the High/Low of the stock for the day to be legitimate, yet that doesn't seem to make much sense either, since the Bid/Ask is almost always Below/Above the stock price.

Can anyone help me understand this?

 

[grayder]

If the price of the stock is the same as the price of the bid then it means that the stock has just traded at the bid side of the market ie a seller has agreed to trade at the bid and the trade match's And vice versa.....
If a tlst trade occurs between the bid/askthenit means that a trade has been matched between willing buyer and seller.

In illiquid markets thenif you place a market order to but say and a market maker inputs a high offer then you will get gouged, prob best to input a price levelwhere you are willing to buy and see what happens.

The traded prices you see on the screen are just that, prices where willing buyers and seller habe transacted a deal....Hope ths helps!

I believe I understand most of the basics of the Bid/Ask, but I've been watching L2 screens for certain stocks over the last few days and a few questions have come to mind.

If I wish to buy a stock immediately (Market Order), I pay the Ask price assuming all of it can be filled at that price. If I wish to sell a stock immediately (Market Order), I pay the Bid price.

Where does the actual price of the stock fit into that, though? I often see cases where the price of a stock is exactly the same as the bid price (for instance), yet from looking at the L2 screen, I can't understand why. There doesn't appear to be more buying pressure than selling pressure in that case. What pushes the actual price of the stock more toward the Bid than the Ask or vice versa? And is the actual stock price really good for anything besides a progress marker for the price of a stock, since Buys/Sells rarely take place at it?

In addition, there have been times when i've watched the L2 screen for certain low volume stocks during the day and there doesn't appear to be any Bid/Ask offers. What happens if I placed a market order under this circumstance? Does it open the door wide for someone to come along and place an opposite Limit order giving me a gouging price for it? Are there any limits or protections for just how gouged I can be? I've read something about Bid/Ask prices needing to be within the High/Low of the stock for the day to be legitimate, yet that doesn't seem to make much sense either, since the Bid/Ask is almost always Below/Above the stock price.

Can anyone help me understand this?

 

[MarkSA]

Yes, that helped immensely.. Thanks!

 

[barn_burner]

Bid/Ask Level 2

I believe I understand most of the basics of the Bid/Ask, but I've been watching L2 screens for certain stocks over the last few days and a few questions have come to mind.

If I wish to buy a stock immediately (Market Order), I pay the Ask price assuming all of it can be filled at that price. If I wish to sell a stock immediately (Market Order), I pay the Bid price.

Where does the actual price of the stock fit into that, though? I often see cases where the price of a stock is exactly the same as the bid price (for instance), yet from looking at the L2 screen, I can't understand why. There doesn't appear to be more buying pressure than selling pressure in that case. What pushes the actual price of the stock more toward the Bid than the Ask or vice versa? And is the actual stock price really good for anything besides a progress marker for the price of a stock, since Buys/Sells rarely take place at it?

In addition, there have been times when i've watched the L2 screen for certain low volume stocks during the day and there doesn't appear to be any Bid/Ask offers. What happens if I placed a market order under this circumstance? Does it open the door wide for someone to come along and place an opposite Limit order giving me a gouging price for it? Are there any limits or protections for just how gouged I can be? I've read something about Bid/Ask prices needing to be within the High/Low of the stock for the day to be legitimate, yet that doesn't seem to make much sense either, since the Bid/Ask is almost always Below/Above the stock price.

Can anyone help me understand this?

The current price on a stock on a chart is the last trade price. That could be the bid or ask or in between or even slightly outside if the market just moved.