My understanding of the bid and ask size is very limited, so my first question is...
What are some good books or videos that contain in depth info on how the bid and ask sizes work? ( surprisingly finding in depth info on the bid and ask size on Google is hard to do )
Here is some info I have found about what one can infer about the bid and ask sizes coupled with questions I have or why the info confuses me.
- A large bid size indicates a strong demand for the stock.
(This confuses me. Couldn't a large bid size mean more of the stock is selling off indicating lowering demand?)
- A large ask size shows that there’s a large supply of the stock.
(Wouldn't this only be true when measuring relative to outstanding shares? Could it also mean there is simply a large demand for the stock?)
If the bid size is significantly larger than the ask size, then the demand for the stock is larger than the supply of the stock; therefore, the stock price is likely to go up.
If the ask size is significantly larger than the bid size, then the supply of the stock is larger than the demand for the stock; therefore, the stock price is likely to drop.
(In regards to 3. and 4. is it really this simple? Are there cases when this is not true? What would be some other caveats when following these rules of thumb?)