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To: RealMuLan who wrote (13764)	4/12/2000 4:31:00 PM
From: TraderGreg	Read Replies (1) \| Respond to of 14266

Bid and ask right...you and I typically buy at the ask and sell at the bid...I say "typically" just to illustrate. When we sell,it is usually TO a Market Maker who is BIDDING the bid price you see on level 2...he is BUYING FROM us. When we buy, it is usually FROM a Market Maker who is ASKING the ask price you see on level 2...he is SELLING TO us. When the bid quantities at best bid/close to best bid appear to increase in numbers, it indicates that MMs are MORE eager to BUY. If that trend were to continue, the BID would most likely rise. Similarly, MMs would tend to want a higher price for the shares in their inventory, as buying interest has increased. So, the ASK would tend to rise as well. When the bid quantities at best bid/close to best bid appear to decrease in numbers, it indicates that MMs are LESS interested in BUYING from us. If that trend were to similarly continue, the BID would most likely fall. Similarly, MMs would be LESS likely to demand/command a high price for the shares in their inventory, as buying interest has decreased. So, the ASK would tend to fall as well. Heavy shorting is simply selling with vigor. As those shorts are filled, they show up as hard hits to the BID. MMs are buying but after a while of buying all that stock, they aren't willing to pay as much, so the BID drops. Short covering is simply buying with vigor(and sometimes a bit of panic). Same comments as the above for the buying scenario. The degree of volatility that you see over a period of time depends on the degree of imbalance between the buying and selling camps. The closer the whole Street is to a consensus position, the less volatile the price swings.

To: RealMuLan who wrote (13764)	4/12/2000 4:32:00 PM
From: Sigmund	Read Replies (1) \| Respond to of 14266

Bid and asked are very simple really. The key is to realize that these are from the MM's perspective. Not from the investors perspective but from the MM's perspective. "bid" is what the MM is willing to pay for the number of shares specified by the MM's bid. As in an auction a "bid' is making an offer to purchase. "asked" is what the MM is asking for the specified number of shares shown in the MM's ask. You as an investor must usually pay what the MM is asking if you are buying or usually accept what the MM is bidding if you are selling. Of course some trades take place in between these two prices but that is another discussion.