Free course · Module 2
Bid, Ask and Market Makers
Understand the price to buy, the price to sell and the gap between them. Explore market makers, order choices and trading costs with a simple worked example.
Written by the StockEducation Editorial Team · Reviewed by Associate Professor Charles Lo, CPA, PhD · Updated 16 Oct 2026 · How we check lessons
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Read in order, or return to the idea you need.
Idea 1 of 4
Read both sides of the quote.
A stock quote has two sides. The bid is the highest price a buyer offers for a specified number of shares. The ask, or offer, is the lowest price a seller asks. Subtract bid from ask to find the spread. Source 1.
A market buy generally trades near the ask; a market sell near the bid. The last traded price describes an earlier transaction, not a guaranteed price for your order. Source 2.
Price to sell at
in this example
Price to buy at
in this example
$20.05 − $19.95 = $0.10
The midpoint is $20.00. It is a calculation, not a promise you can trade there.
Why can my fill differ from the quote?
Read bid, ask, size and time together; the last trade is not your guaranteed fill.
Idea 2 of 4
A small spread can add up.
Under unchanged quotes, buying at the ask and selling at the bid crosses the full spread. At $19.95/$20.05, 100 shares cost $2,005 to buy and return $1,995 when sold: a $10 difference before other costs. This assumes both orders fill entirely at those prices.
Compare two fictional trades below. Each starts with $10,000 of midpoint value, so the dollar difference also reveals the percentage difference. This is spread arithmetic, not a prediction of actual trading results.
$99.99 bid / $100.01 ask
100 shares · $10,000 midpoint value
0.02% of midpoint value
$9.90 bid / $10.10 ask
1,000 shares · $10,000 midpoint value
2% of midpoint value
$200 ÷ $2 = 100, despite the same $10,000 midpoint value.
Does a zero commission mean a zero-cost trade?
Compare spread as a percentage and multiply by the actual share quantity.
Idea 3 of 4
Choose what the order controls.
Market orders prioritize execution; limit orders set a price boundary. A buy limit caps the price paid and a sell limit sets a minimum, but the order might not fill. A standard stop order becomes a market order once triggered, so its stop price does not guarantee the fill price. Source 2.
Your broker routes the order. An exchange, an electronic matching venue or a market maker may execute it. Market makers quote buying and selling prices; customer orders also contribute to market prices. Source 3.
Execution first
Price can move
Price boundary
May not fill
Trigger, then market
Fill can pass the stop
Price control and certainty of filling are different trade-offs.
What do best execution and NBBO mean?
Why look at payment for order flow?
A limit controls price if it fills; a stop trigger does not guarantee the execution price.
Idea 4 of 4
Try the spread with fictional prices.
Keep the midpoint fixed and change one assumption. Choose a quote, then vary the share quantity. Watch how the spread difference changes even though the midpoint stays at $20.00. This tool calculates fictional full fills at unchanged quotes; it sends no orders.
What does crossing this spread cost?
Fictional · midpoint $20Bid $19.95 · Ask $20.05
Round-trip difference: $10.00 · 0.50% of midpoint value.
Difference = shares × (ask − bid). Quotes stay unchanged and every share fills at the displayed price with sufficient available size. Ignores commissions, other fees and price movement. It does not model a real order book, predict fills or calculate market-maker profit.
When does the trade actually settle?
Practice without putting real money at risk
Check the quote and order instruction first; review the fill and settlement afterward.
Quick check
Three quick checks. Feedback straight away.
At an unchanged $19.95 bid / $20.05 ask, what is the difference after buying and selling 100 shares at those quotes?
Choose an answer to see the explanation.
Which order sets the worst acceptable execution price but might never fill?
Choose an answer to see the explanation.
When does an ordinary Monday stock trade settle under T+1 if Monday and Tuesday are business days?
Choose an answer to see the explanation.
Review your takeaway card and the learning path
- Bid and ask are different prices. Read size and time too.
- Spread × shares gives the fictional round-trip difference. State the fill assumptions.
- A limit controls price if it fills. A standard stop becomes a market order.
- Routing and settlement matter. Review disclosures, the fill and the settlement date.
Reading markers and these practice checks stay on this device. They do not mark the LMS lesson complete.
Sources and assumptions
- Investor.gov: Bid Price. Bid, ask and spread definitions.
- Investor.gov: Types of Orders. Market, limit and standard stop orders.
- Investor.gov: Executing an Order. Quote quantity, routing, market makers and price improvement.
- FINRA Rule 5310. Best-execution duty and relevant factors.
- SEC: Regulation NMS. National best bid/offer framework.
- SEC: Rule 606 FAQs. Covered routing reports and payment relationships.
- SEC: Shorter settlement cycle. T+1 scope and May 28, 2024 compliance date.
Sources checked 16 October 2026. US market overview; rules and broker features can change. All quoted prices and spread comparisons are fictional. The local exercise sends no orders and does not mark an LMS lesson complete. General education, not personal investment advice.
StockEducation provides general education, not personal financial, tax or legal advice. Nothing here recommends a specific security. Investing involves risk, including loss of money you invest.
