# Midpoint price

Midpoint price is the price halfway between the current best bid and best ask for a security, calculated as their arithmetic average.

## What it means

The midpoint sits halfway between the highest displayed price a buyer is bidding and the lowest displayed price a seller is asking at a given moment. These prices are called the best bid and best ask. The midpoint is a reference price, **not a promise that an order can be filled there**.

For a stock quoted in US dollars, the midpoint is expressed in US dollars per share. It changes when either side of the quote changes. A quote used to calculate it should come from the same market-data snapshot; combining a bid from one moment with an ask from another can produce a misleading number.

## How it is calculated

`Midpoint price = (best bid + best ask) / 2`

- **Best bid:** the highest available quoted buying price, in US$ per share.
- **Best ask:** the lowest available quoted selling price, in US$ per share.
- **Midpoint price:** their arithmetic average, in US$ per share.

The difference between the best ask and best bid is the quoted bid-ask spread. Therefore, the midpoint is half a quoted spread above the bid and half a quoted spread below the ask. It can fall between valid tick increments: a calculated midpoint need not be a price at which an order can be entered or executed.

## Worked example

Suppose a hypothetical stock has a best bid of **US$49.90** and a best ask of **US$50.10**, both quoted at the same moment.

1. Add the two prices: US$49.90 + US$50.10 = US$100.00.
2. Divide by two: US$100.00 / 2 = **US$50.00 per share**. That is the midpoint.
3. Calculate the quoted spread: US$50.10 − US$49.90 = **US$0.20 per share**. Half the spread is US$0.10 per share.

In this example, a hypothetical purchase of 100 shares at the displayed ask would have a fill price US$0.10 per share above the midpoint, or **US$10** above 100 times the midpoint. A hypothetical sale of 100 shares at the displayed bid would be US$10 below that reference. This comparison excludes commissions and any price changes or market impact. Neither fill is guaranteed by the quote.

## Why it matters before you trade

The midpoint offers a neutral benchmark for describing where an execution price falls within the quoted spread. For example, the effective spread for a completed trade compares its fill price with the midpoint at the relevant quote time. That calculation uses the **actual fill**, not just the price visible before the order was placed.

A midpoint alone does not tell you whether shares are available at that price, how many shares are available at the bid or ask, or whether the quote will persist. An order that can execute immediately may pay the ask when buying or receive the bid when selling. Order size, liquidity, volatility and changing quotes can affect the eventual fill. For a pre-trade check, the midpoint is most useful alongside the spread, order size and an assessment of possible execution costs—not as a forecast of the fill price.

## How PreTrAIde uses it

PreTrAIde's documented pre-trade analysis estimates a stock's bid-ask spread using a liquidity-tier model, a volatility uplift and a one-tick floor. It also assesses participation in daily volume and estimates market impact. These measures relate to the costs and conditions that a midpoint comparison can help explain. The product facts do **not** state that PreTrAIde calculates or displays a live midpoint price, so its spread estimate should not be treated as a live bid-and-ask quote.

PreTrAIde returns GO, NO-GO or MODIFY verdicts with reasoning as decision support before an order is placed. It does not receive, transmit or execute orders.

## Common mistakes

- **Treating the midpoint as an executable quote:** a price halfway across the spread may have no available shares.
- **Using a stale quote:** a midpoint calculated before an order may differ from the midpoint when a trade fills.
- **Confusing midpoint with last traded price:** the last trade is a past execution; the midpoint comes from the current bid and ask.
- **Ignoring other costs:** a midpoint comparison by itself omits commissions and does not predict market impact.

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Source: https://pretraide.com/glossary/midpoint-price