Lesson 23 of 31 · Zero to reading a chart

Bid vs Ask: Why Your Order Didn't Fill

A stock has two prices, not one: the bid (the most a buyer will pay right now) and the ask (the least a seller will take). Buy now at the ask, sell now at the bid. The chart price is neither - it is the last trade, which already happened - so an order at the chart price can sit and never fill.

You saw a price on the screen. You placed an order at that price. And it did not go through. Why?

Most people think a stock has one price, and that is what they pay.

It has two. And the number on the chart is neither of them.

In episode five you saw two queues. Buyers, each with the most they would pay. Sellers, each with the least they would take. Today, those two numbers get their names.

Think of a market stall. You want an apple. You offer a dollar. The seller wants a dollar and two cents.

Nobody has bought anything yet. There are two prices on one stall. The most you will pay. The least she will take.

The most a buyer will pay right now is called the bid. The least a seller will take right now is the ask.

Two different numbers, side by side, all day. They change every second, as people join the queues and leave.

So there are always two prices. To trade right now, you use the other side's number.

Buy this second? You pay the ask. Sell this second? You get the bid.

Here is a real day, frozen at one moment. Two o'clock in the afternoon.

The last trade printed here, at fifteen fifty-five. That is the price the chart shows.

There is no bid on this chart, and no ask. Only trades that already happened.

Now draw the two queues around a last trade.

The bid, a little below. The ask, a little above. Three numbers, and none of them the same.

So the chart price is the last time two people agreed. That already happened.

The bid and the ask are what people will do next. The chart shows the past. You can only trade in the present.

So that is why your order did not fill. You asked to buy at the last trade.

But right now, the sellers want more than that. Your order joins the buyers' queue, and waits for a seller to come down.

Maybe one does. Maybe none does. That is what didn't fill means.

The bid is the most a buyer will pay. The ask is the least a seller will take.

Buy now at the ask. Sell now at the bid. The chart shows neither.

Here is the mistake. Somebody sees the chart price, and plans to buy at that.

That number is history. To buy right now, you pay the ask. And that is a different number.

Next time you see a stock quoted, find both numbers. Say which one you would pay.

Check yourself

Which price do you pay to buy right now?

The ask.

Which price do you get to sell right now?

The bid.

Is the chart price either of them?

No. It is the last trade.

Next lesson: The Spread: You Lose Money the Second You Buy.

For learning only. Not financial advice, not signals, not stock picks.