Bid, Ask, Mid: Why Last Traded Price Is Misleading (Use This Instead)
Why last traded price is a trap
In many prediction markets, last traded price is not the best representation of the market right now. It is simply the price of the most recent trade, which can be:
• old (no recent trades)
• tiny size (one small fill)
• off market (a trade that crossed a wide book)
• misleading during fast updates
If you anchor your decision to last trade, you can think you have an edge when you do not, or you can underestimate execution costs.
What to use instead: bid, ask, and mid
The reliable real time view starts with executable quotes:
• Bid: the best price you can sell into right now
• Ask: the best price you can buy at right now
• Mid price: the midpoint between bid and ask
For decision making and measurement, mid is a clean reference. For execution, bid and ask are what matter.
Last trade can be stale even when quotes moved
If the market is quiet, the last trade can be minutes or hours old. Meanwhile, information, liquidity, and quotes may have changed. In a thin market, the book can shift without any trade printing.
That is why last trade is not a dependable input for implied probability or for fair price comparisons.
Wide spreads make last trade extra misleading
When the bid ask spread is wide, last trade may print near one side, then the market re quotes. Example:
• current bid 44, ask 56
• last trade prints 50 (or even 56 if someone lifted the ask)
Last trade at 50 makes it look like the market is near 50, but the executable market is wide and costly. The true immediate buy price is 56 and the true immediate sell price is 44.
Order book depth decides the real price for your size
Even if bid and ask look reasonable, the next question is depth. Open the order book and check how much size is available near the top.
If you trade size into a thin book, you will walk levels and pay slippage and price impact.
This is why a market can be tradable for 10 contracts and untradable for 1,000.
Use the right price for the job
For entering a trade
Use executable prices:
• buying YES uses the ask
• selling YES uses the bid
Last trade is not executable. It is historical.
For measuring execution quality
Use mid as the reference and measure with execution metrics:
See Effective Spread and Realized Spread.
For translating price to probability
Use the scale correctly and avoid unit mistakes. Many platforms use different price scale conventions.
See Market Price to Implied Probability.
A fast pre trade checklist
Before you trade, do this:
• Confirm bid, ask, and mid are visible and updating.
• Check the spread. If spread is wide, require more edge or skip.
• Check order book depth at your intended size.
• Estimate your average fill if you consume multiple levels.
• Add fees separately and compute break even probability.
If you want a full liquidity checklist, see Liquidity Checklist.
Worked example
Assume a 0 to 100 market:
• last trade 50
• current bid 46, ask 54
If you buy right now, you pay 54. If you sell right now, you get 46. Anchoring to 50 hides the spread cost.
Now add size: if the ask has only 20 contracts at 54 and the next levels are 56 and 60, your average fill may be 57 or worse. That turns a small edge into negative EV.
What responsible platforms should show
Platforms that want long term trust should reduce user confusion by:
• showing bid, ask, and mid prominently
• showing depth at the top of book
• labeling last trade as historical and showing its timestamp
• warning when spreads are wide or books are thin
• showing fee estimates before confirmation
Execution transparency is user protection.
Common mistakes
Using last trade to compute implied probability: last trade can be stale or off the executable market.
Ignoring spread: you pay spread before you even start.
Ignoring depth: your size creates impact and slippage.
Treating mid as a fill price: mid is a reference, not a guarantee.
Takeaway
Last traded price is a weak signal in prediction markets. Use bid and ask for execution, mid for measurement, and order book depth for sizing. If you do this consistently, you will avoid many false edges and many execution surprises.
Related
• Liquidity Checklist: How to Tell If a Market Is Tradable
• Slippage, Price Impact, Execution Risk
• Effective Spread and Realized Spread
• Bid
• Ask