The ask price (also known as the offer) represents the lowest price a seller is willing to sell their shares for. The bid price is what represents all the buyers.
In the above Level 2 of the QQQ’s you will notice that the ask is on the right hand side and is currently sitting at $118.59 with quite a bit of orders sitting there. The top order has a size of 73 which means that someone is willing to sell 7,300 shares (73 x 100) at the price of $118.59.
The ask will always be higher in the bid unless there is a crossed market, and the difference between the bid and ask is known as the spread. You will also see on the Level 2 what exchange the different orders are being held at under the “MM” column (Market Maker), with most orders being routed through PHIL, BATS and EDGX, but that could be different for each security.
In this example there are a lot more sellers on the offer than there are buyers on the bid, which could indicate that short sellers are trying to protect that level and bring prices down. However, you shouldn’t trade just off the Level 2. Instead you should use it along with other indicators like volume, time and sales, and technical indicators like MACD and stochastics.
It’s also important to note that when offers disappear from the Level 2, it doesn’t always mean orders are getting executed on the offer. It could mean traders are canceling their order and looking for better prices, which is why using it with time and sales is so important.
Selling The Ask
Placing a sell limit order on the current ask, or “selling the ask”, does not mean you are guaranteed to get a fill, it just means that you are offering at the lowest price at that moment. There will have to be a buyer willing to buy up to your offer price in order for you to get executed. So say you’re the lowest offer at $118.59.
That means that someone who is looking to buy shares would have to buy at that price or higher for you to get filled. Sometimes you can only get a partial fill, in which you only a portion of your order gets executed.
If you were trying to sell 1,000 shares but a buyer came in with only 500 at that price and then offers came in lower than your price, you would only be filled on the 500, leaving you with the leftover 500 shares.