Sometimes referred to as the quote size, a bid size has to do with the quantity of shares and stocks that are being offered at a particular bid price per share, but offered in terms of blocks of shares. Along with the ask size, the bid size is considered to be an excellent means of measuring the potential short term performance of the stocks, helping to identify both upward and downward trends.
Traders who deal with such major stock exchanges as the NYSE and AMEX find the use of bid size very helpful in the process of ascertaining upcoming trends. This is due to the fact that both of those exchanges functions on a basis of maintaining some degree of balance in the relationship between the buying and selling of orders, through the use of specialists. However, many experts consider the use of bid size to be less effective on other exchanges, such as the Nasdaq. A contributing factor is that Nasdaq and similar exchanges focus more on the activity of market makers, who may or may not be specialists.
Determining the viability of responding to a bid size favorably has a lot to do with the goals of the buyer. In cases where the buyer has the desire to increase the number of shares of a given stock in his or her possession, the projected short term performance may be less important than getting the shares at a good price. Often, this presupposes some expectation of the shares rising in value over the long term, even if the short term outlook indicates a temporary loss. At other times, the projected short term performance may discourage the buyer from meeting a bid on the shares, since there is not a perception of gaining any value from the transaction.
The bid size is not always the most important factor in the decision to place bids, or to pass on submitting a bid. However, there are a sufficient number of investors who believe that as an indicator of future performance, the bid size is well worth considering along with other factors.
