
Touchline
A touchline is the highest price that a buyer of a particular security is willing to bid, or the lowest price at which a seller is willing to offer (or sell) at any given time in the trading day. The bid price is the highest bid someone is willing to post at that particular moment, and the ask is the lowest posted price someone is willing to offer at that particular moment. The bid price is the highest bid someone is willing to post at that particular moment, and the ask is the lowest posted price someone is willing to offer at that particular moment. This relates to the bid-ask spread, which is the amount by which the ask price exceeds the bid price for an asset in the market. If someone were to sell 1,000 shares to the bid price, the bid price would not be $40.12 anymore, but rather the next highest bid.

What Is a Touchline?
A touchline is the highest price that a buyer of a particular security is willing to bid, or the lowest price at which a seller is willing to offer (or sell) at any given time in the trading day.
The touchline is thus represented by the bid-ask spread of a security. As the bid and ask move, so will the touchline.



Understanding a Touchline
A touchline specifies the best bid or ask for a particular security at any point in time. Very liquid securities will generally have a narrow bid-ask spread, while illiquid securities will have a wide spread. The EUR/USD currency pair, for example, is considered highly liquid and thus has a small bid-ask spread.
If a security has various buyers who are bidding at $5, $5.10, and $5.15, the touchline bid price would be $5.15. This is the highest price someone is willing to post a bid at.
At the same time, if the security has various sellers at $5.20, $5.30, and $5.35, the touchline ask price would be $5.20. This is the lowest price someone is willing to post an offer at. The bid-ask spread on this security is $5.15 for the bid and $5.20 for the ask. The spread, or difference between the bid and ask, is $0.05.
Bid-Ask Spread
A touchline represents the best bid and/or ask price for a given asset. This relates to the bid-ask spread, which is the amount by which the ask price exceeds the bid price for an asset in the market. The bid-ask spread is essentially the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept to sell it.
The bid-ask spread reflects the supply and demand for a particular asset, with the bids representing the demand and the asks representing the supply. The depth of the bids and asks can have a significant impact on the bid-ask spread, making it widen substantially if one outweighs the other or if both aren't robust.
Market makers and traders exploit the bid-ask spread and the depth of bids and asks to net the spread difference. This is one of the main ways traders and market makers bring in a profit. For example, a market maker may bid at $5.10 and also offer at $5.15. If someone sells to the market maker, the market maker will have bought at $5.10. If someone buys from the market maker at $5.15, the market maker will have made $0.05 on each share traded.
The size of the bid-ask spread from one asset to another differs mainly because of the difference in liquidity of each asset. Certain markets are more liquid than others. Some less-liquid assets may have spreads that are up to 1% or more of the bid price.
Example of a Touchline in an Active Stock
The following image is a screenshot of the bid and ask prices in Twitter Inc. (TWTR) at a particular time during the day.
Image by Sabrina Jiang © Investopedia 2021
The bid price is the highest bid someone is willing to post at that particular moment, and the ask is the lowest posted price someone is willing to offer at that particular moment. For this image, the bid touchline is $40.12, and the offer touchline is $40.13.
The bid and ask prices aren't static. Someone may sell directly to the bid or buy directly from the offer, which will remove the shares posted at that price.
In this example, there are 1,000 (10 x 100 shares, or 10 x Round Lot) shares being bid at $40.12. If someone were to sell 1,000 shares to the bid price, the bid price would not be $40.12 anymore, but rather the next highest bid. In a liquid stock, the next bid or offer is usually 1 cent below the current bid, or 1 cent above the current offer. In this case, the next bid would be $40.11 under normal circumstances.
Related terms:
Asset
An asset is a resource with economic value that an individual or corporation owns or controls with the expectation that it will provide a future benefit. read more
Best Ask
The best ask is the lowest quoted offer price from competing market makers for a particular trading instrument. read more
Bid and Ask
The term "bid and ask" refers to a two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time. read more
Bid-Ask Spread
A bid-ask spread is the amount by which the ask price exceeds the bid price for an asset in the market. read more
Demand
Demand is an economic principle that describes consumer willingness to pay a price for a good or service. read more
Currency Pair: EUR/USD (Euro/U.S. Dollar)
The Currency Pair EUR/USD is the abbreviation for the euro and U.S. dollar. read more
Illiquid
Illiquid is the state of a security or other asset that cannot quickly and easily be sold or exchanged for cash without a substantial loss in value. read more
Inside Market
The inside market is the spread between the highest bid price and lowest ask price in a quoted financial product. read more
Liquid Asset
A liquid asset is an asset that can easily be converted into cash within a short amount of time. read more