How does the bid offer spread get determined in active exchanges? Is it just the buying and selling price/quantity of the last order? If so why not just pay extra buy a share before you sell massive amounts of shares? Do traders look at recent histories of bid/offer to determine if they can completely ignore the current bid offer to make a more reasonable spread
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i think you're confused the bid is the highest price someone is willing to buy at the ask is the lowest price someone is willing to sell at
if Bob is willing to buy at 5 and sell at 10 Jim is willing to buy at 4 and sell at 11 and George is willing to buy at 6 and sell at 15
bid is 6, ask is 10
i think bid and ask prices are determined by limit orders left with the exchange
the last price executed at is just the current price of whatever you're tracking
yes, markets arent price guides. if the market is at bid 10 ask 11, and you put in an order to buy 1 share at 1,000,000 then you will pay 11, not 1,000,000. nice idea for a get rich quick scheme, noone would ever have thought of that
OP, also don't forget that quotes come with a size. 100 shares at 45.54$
so how are bid/offer spreads determined on exchanges? Is it based on the limit orders or the last completed order? Or does it match up size between bids and offers entered into the system? Wouldn't some small players be able to collude on some relatively illiquid assets and some stale prices by trading a few shares then?
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