What is Quote Size?
Quote size is the amount of shares offered for sale or purchase. Two types of quote size exist: bid size and ask size. A bid size refers to the number of shares an investor would buy at a particular price. An ask size refers to the number of shares a seller would sell at a particular price.
A share usually has several bid prices and ask prices, which refer to the prices that buyers want to buy it for and the prices that sellers want to sell it for, respectively. At a certain bid price, a buyer is willing to purchase a number of shares, known as the bid size. At a certain ask price, a seller is willing to sell a number of shares known as the ask size. A quote size of one usually represents 100 shares.
For example, a share has a bid price of $20 US Dollars (USD) and a bid size of 20. These figures indicate that an investor would buy 2,000 shares at a price of $20 USD per share. If the ask price is $20 USD and the ask size is 20, it means that the seller would sell 2,000 shares at $20 USD per share.
The quote size of a certain share indicates its supply and demand levels. A large bid size means that the bid price is relatively low and a strong demand exists for the share at that price. A large ask size indicates that the ask price is relatively high and a large supply exists.
Quote size helps investors predict the movement of the share price. Investors expect the price to increase if the bid size is larger than the ask size because it means that the demand exceeds the supply of the share. They expect the price to drop if the ask size is larger than the bid size. In this way, investors use quote size to help them make buy or sell decisions.
If there is a large order for shares, small quote sizes lead to trades occurring at a price that is worse than the best bid or ask price. This leads to price fluctuations. In contrast, a market where large quote sizes exist can support large orders without having too many price fluctuations. A market with large quote sizes is known as a deep market, whereas a market with small quote sizes is known as a thin market. Some stock exchanges prioritize shares with large quote sizes to encourage the trading of large share quantities and promote liquidity.
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