What is Quoted Price?

Traders and investors commonly refer to the term "quoted price" when discussing the price of a stock. But what exactly does it mean?
 

If you have ever observed an electronic ticker at a marketplace or used an online trading platform, you have likely seen real-time notifications displaying the prices of stocks in demand. These are examples of quoted prices.

A quoted price refers to the most recent price at which a security, equity derivative, or asset has been transacted. It represents the price at which buyers are willing to purchase the stock and sellers are willing to sell, reflecting the most up-to-date market consensus.

How does a quoted price work?

A quoted price in the stock market represents the current price at which a particular stock or financial asset is being bought or sold. Let us understand how it works:

Bid Price: The highest price a buyer is willing to pay for the stock.

Ask Price (or Offer Price): The lowest price at which a seller is willing to sell the stock. The quoted price might sometimes reflect the midpoint of these two prices (i.e., between the bid and ask).

Real-Time Pricing: Stock prices are quoted in real time during market hours, fluctuating continuously based on supply and demand.

Market Makers: Some stocks have market makers—entities that ensure there's liquidity by buying and selling stocks. They set the bid and ask prices.

Exchange Listing: The quoted price is determined by the stock exchange where the stock is traded (e.g., NYSE, NASDAQ). This price is publicly available.

Volume Impact: High trading volume can cause quicker price changes. If a stock is actively traded, the quoted price may move rapidly.

Opening and Closing Prices: The quoted price can differ at market open and close due to various factors, such as after-hours trading, economic data, or corporate earnings releases.

Fluctuations: The quoted price can change quickly based on news, earnings reports, geopolitical events, and investor sentiment.

Bid-Ask Spread: The difference between the bid and ask prices is known as the "spread." A narrower spread typically indicates higher liquidity and more efficient pricing.

Historical Context: Quoted prices can also show the high, low, and closing prices for a given day, offering additional insights into stock performance.

Why Bid and Ask Prices Matter?

Let us understand why Bid and Ask prices matter in the stock market:

Market Liquidity: The Bid price represents what buyers are willing to pay, and the Ask price represents what sellers are asking for. The difference between the two is known as the "spread." A smaller spread often indicates higher liquidity, meaning it's easier to buy and sell stocks.

Buy/Sell Execution: If you want to buy a stock, you will pay the Ask price. If you want to sell, you will receive the Bid price. These prices determine how quickly and at what price you can enter or exit a position.

Price Movement: The Bid-Ask spread reflects market sentiment. A large spread can indicate uncertainty or volatility, while a small spread suggests more consensus among market participants about the stock's price.

Transaction Costs: The difference between the Bid and Ask price represents an implicit cost of trading. A wider spread means it may cost more to enter and exit a trade because you are buying at a higher price and selling at a lower price.

Market Sentiment Indicator: The relative size of the Bid and Ask prices can signal how confident buyers and sellers are. If the Ask price is much higher than the Bid price, it could suggest that sellers are holding out for a higher price.

Arbitrage Opportunities: Discrepancies between bid and ask prices in different markets can lead to arbitrage opportunities, where traders can profit from price differences in various exchanges or between related assets.

Example of a Quoted Price?

Stock Symbol: TCS (Tata Consultancy Services)

Quoted Price: ₹3,500.75

Bid Price: ₹3,499.50

Ask Price: ₹3,502.25

Volume: 1,500,000 shares

Change: +₹25.50 (+0.73%)

Here,

Quoted Price: The current market price of the stock, in this case, ₹3,500.75, which is the most recent traded price.

Bid Price: The highest price a buyer is willing to pay for the stock (₹3,499.50).

Ask Price: The lowest price a seller is willing to accept for the stock (₹3,502.25).

Volume: The total number of shares traded in a given period (e.g., 1,500,000 shares).

Change: The difference between the current price and the previous closing price, which is shown as +₹25.50, indicating an increase in the stock's value.

This format of quoted price is commonly seen on Indian stock market trading platforms, like NSE (National Stock Exchange) or BSE (Bombay Stock Exchange).

Key Considerations in Quoted Price

Key considerations in quoted prices include:

Market Demand and Supply: The quoted price reflects the balance between buying and selling pressure. Higher demand (more buyers) can push the price up, while higher supply (more sellers) can push the price down.

Bid-Ask Spread: The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask) affects the quoted price. A wider spread often indicates lower liquidity.

Market Sentiment: Investor emotions and perceptions, such as fear, greed, or optimism, can significantly impact the quoted price.

Company Performance and News: Earnings reports, new product launches, management changes, or legal issues can lead to fluctuations in the stock's quoted price.

Macroeconomic Factors: Broader economic conditions, such as interest rates, inflation, and unemployment rates, often influence the overall stock market and individual quoted prices.

Liquidity: Stocks with low trading volumes tend to have more volatile and less predictable quoted prices due to limited buyer/seller interest.

Order Types and Market Conditions: The way orders are placed (market orders, limit orders) and prevailing market conditions can influence quoted prices, especially in volatile markets.

Time of Day: The quoted price can vary throughout the trading day, with more significant price movements typically occurring during market open or close when volume is highest.

Corporate Actions: Stock splits, dividends, mergers, and acquisitions can cause adjustments in the quoted price.

External Events: Global events, geopolitical developments, and natural disasters can impact investor behavior and, subsequently, quoted prices.

Regulatory Changes: Any changes in government regulations or policies can alter a company’s profitability outlook, affecting its quoted stock price.

What the Quoted Price Does Not Tell You?

The quoted price represents the price at which a stock is last traded, but it doesn't provide a complete picture. Here's what it doesn't tell you:

Bid-Ask Spread: It does not reflect the difference between the price buyers are willing to pay (bid) and the price sellers are asking for (ask). A wider spread can indicate lower liquidity.

Volume of Trades: The quoted price does not show how many shares were traded at that price. Higher volume can indicate more market confidence in that price.

Order Size: It does not reveal how many shares were bought or sold at that price, which can impact price stability.

Market Sentiment: The quoted price does not tell you whether the stock is in an uptrend or downtrend, or the general sentiment behind the price movement.

Price Fluctuations: It does not account for rapid price changes between trades, so the price could be outdated by the time you act on it.

Underlying News/Events: It does not explain the reasons behind the price movement, such as earnings reports, market news, or external events affecting the stock.

Conclusion

The quoted price is the current price of a stock or commodity, showing how it's performing at that moment. While you may not know exactly which markets are buying or selling it, you can get a good idea of how the stock is doing. By looking at the quoted price, you can choose a stock that could give you the best return. Using a stock market trading app can help you track these prices and make smarter decisions.