Invest and Trade Profitably with Jon Johnson

Could you explain to me the BxA size? I see 67×5, 1×1 and 4×3 and I can’t figure it out.

August 30, 2000

What you are looking at are how many shares there are at a certain bid price that are willing to be bought and how many shares there are to be sold at a certain ask price. In other words, there are orders put in by brokers on behalf of their clients. A client wants to buy 100 shares at a specific price. That is a bid to buy at that price. That 100 shares is usually shown as a 1 (you multiply what is shown by 100). The bid prices are listed from ‘best’ (highest) to the lowest. On the other side of ledger the bids are matched against the asks, i.e., the prices at which brokerage clients are willing to sell their shares of the stock. They are listed from lowest to highest. The number of shares by each indicates how many shares are wanted to buy at that price or how many shares are for sale at that price.

A large bid size indicates there is demand for the stock. A large ask size indicates there is excess supply at that price. If there are large ask sizes at higher prices, there is even more supply ready to hit the stock price. It is not always such a clean analysis, however, as on Nasdaq there are market makers that, while required to buy and sell the number of shares shown at the prices shown or match up trades at those prices, the action happens very quickly. Moreover, there may not be enough interest despite any bid/ask imbalance to push the stock in that direction. It is always nice, however, to ask your broker just to take a look at it when you are placing an order. If the stock is making a strong push through the buy point, however, we won’t sweat this too much; if there is a lot of volume we will go ahead and enter. If we have any doubts, we can enter a partial position.

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