“What’s the quoted price of the stock?” You must have heard this question often from traders and investors. So what is quoted price?
Have you noticed the electronic ticker running at a market place telling the price of a stock? Or if you are trading through an online trading platform, have you seen small notifications telling you the prices stocks that are in demand? These are quoted prices for those stocks.
In simple terms, a quoted price is the latest price at which the equity derivative or asset is traded. A quoted price is that which buyers have agreed to pay for the stock and sellers have agreed to receive.
What is quoted price, and how does it work?
So, as discussed, the quoted price is the most recent deal between buyers and sellers for a stock. To understand the quoted price appearing on a ticker, you need to know how it works.
Quoted price has two aspects to it: the bid price and asking price. The bid price, as the name suggests, is the offer that an investor or trader makes to purchase equity or asset. For example, you are interested in investing in five shares of stock A. The bid price in the quoted price is the highest amount that you or another investor are willing to pay to purchase the shares.
To counter your bid price, the seller of the stock will float an asking price. This is the lowest price that the seller is willing to sell the shares to you.
Depending on the gap between the bid price and the asking price, the stock’s liquidity is decided. In other words, the gap chooses how easy or difficult it will be to sell the stock.
So then why is quoted price essential? Well, for starters, it is the first step in deciding the right stocks in which to invest. Investors and traders need to understand how equity, commodity or even currency is behaving. Through quoted price, you can get an insight into the demand and supply of the asset.
The quoted price is a real-time, up-to-the-moment price of equity or commodity. While you may not be able to know which markets are bidding for the equity or selling it from the quoted price, you can get an overview of how the stock is behaving. By studying the quoted price, you can cherry-pick a stock that can give you the maximum benefit.