Bid and ask explained: where every trade happens

The price on a chart is only a summary. Underneath it sits the order book: a stack of real orders from people who want to buy and people who want to sell, each waiting at its own price. Every trade you see on a chart happened there, at the meeting point of two sides called the bid and the ask. Once you have watched a book fill and empty, price stops looking random.

What you’ll learn

• What bids and asks are, on a real order book
• Who moves price: the taker who crosses the spread, or the maker who waits
• What a deep book and a thin book look like, side by side
• Why the same instrument can trade very differently on two exchanges

What is inside the price?

This is Tesla’s order book on Binance at one moment on a Saturday evening. It has two sides.

• Asks (red) are sellers waiting above the price. Each row is a price and how many shares are offered there. The lowest one, 382.85, is the best price anyone can buy at right now.
• Bids (green) are buyers waiting below. The highest, 382.84, is the best price anyone can sell at right now.
• The spread is the gap between them: here one cent, the smallest step Tesla’s price can take. On a busy instrument, the two sides press right up against each other.

Look at 382.80: 181.92 shares bid, far more than any other row. Someone is waiting there with size, at a round number. That is what the beginning of a level looks like from inside the book.

Who moves the price: taker or maker?

Nothing in the book trades on its own. A trade happens only when someone gives in.

• The taker sends a market order. A market buy takes the best ask right now; a market sell hits the best bid. The taker crosses the spread, gets filled for certain, and usually pays a higher fee.
• The maker places a limit order and waits in the queue. It adds liquidity to the book, may never fill, and usually pays a lower fee, sometimes even receives a rebate. Fees differ by exchange, so check yours (more in maker vs taker fees).

So price moves when takers push through the resting orders. A market buy that eats all of the best ask lifts the price to the next ask. Makers build the book; takers move the price through it.

A deep book and a thin book

A depth chart adds up every order waiting at each distance from the price: bids to the left, asks to the right. The taller the walls, the more liquidity is there.

At the same moment, on the same scale:

• SpaceX on Binance: about 22.9 million USDT waiting within half a percent of the price. Steep walls on both sides.
• Intel on Bybit: about 265 thousand USDT in the same half percent. On this scale it is almost a flat line.

The first book is about 86 times deeper. Both are real markets, and both show a price on a chart that looks just as solid. Only the book tells you how much is really standing behind that price.

Same instrument, two different books

It gets more interesting. Intel trades on both Binance and Bybit, at the same price, at the same moment. Yet the top ten levels of the Binance book hold about 281 thousand USDT, and Bybit’s about 61 thousand. On Bybit several prices are almost empty: holes in the book that price can fall straight through.

Same company, same contract, same second. The exchange you choose decides how solid the ground is under your order. ChartThread’s spreads page watches the same instruments across Binance and Bybit for this reason.

One market buy, four books

Now send the same market buy into each book and see where its last share fills.

• 100,000 USDT: it barely moves SpaceX (0.003%), moves Tesla and Intel on Binance by a few hundredths of a percent, and Intel on Bybit by 0.14%.
• 250,000 USDT: SpaceX still barely notices (0.009%). Intel on Bybit jumps 1.65%, because the order has eaten through every ask nearby and has to reach far up the book to finish.

That jump is slippage: the difference between the price you saw and the price you paid. In a deep book it is nothing; in a thin one it is the biggest cost of the trade.

One more detail: this snapshot was taken on a Saturday, when the stock market itself is closed and the stock perpetuals trade on their own. Books are often thinner at such times, so the same order can cost more on a weekend night than on a weekday afternoon.

Common mistakes

• Trusting the chart price as the price you will get. A market order fills at the asks (or bids) that are actually there. Check the book first.
• Using market orders on a thin book. A large market order can walk the price far away from you. Use a limit order, or split the order.
• Ignoring the venue. If one exchange is much thinner for your instrument, trade where the book is deep.
• Forgetting the clock. Weekends, nights and holidays thin out books. The same trade can cost more at those times.

Key takeaways

• The order book holds bids (buyers waiting below the price) and asks (sellers waiting above); the gap between the best of each is the spread.
• Takers cross the spread with market orders and move the price; makers wait with limit orders and build the book.
• Depth is how much is waiting near the price: a deep book absorbs big orders, a thin one lets a single order move price a lot.
• The same instrument can be deep on one exchange and thin on another, and thinner at night or on weekends.