[stock pick tips] Liquidity of stock shares

Dear Readers,

Recently we have discussed some fundamental criteria for stock
screening process. Today I would like to show you a technical
parameter that you should use for stock screening.

This parameter is very important as it helps you in another
important stock trading task - in risk management.

The parameter is liquidity. It can be measured by average stock
trading volume. This value indicates how many shares are
typically traded during a day. Well selected value decrease
risk in your trading.

How? The ability to enter and exit position easily even with
position of thousands of shares is very important. The exit or
entry should not move price far from actually traded price. And
also the difference between bid and ask should be low.

Stocks that are not traded with enough volume are risky. When you
want to enter trade in such stock on specific price, it is almost
impossible to do it. Spread between bid and ask for thinly traded
stocks is large and price is moving rapidly away from your
expected price as you entering or exiting the trade.

So my next tip for picking best stock is to use average stock
trading volume value. The average trading volume parameter could
be easily set for any stock screener software or website.

Here are values you have to use. They are sorted by different
types of trading you do.

Day traders should prefer stocks with average volume above
800 000 or 1 Million shares per day

Short term swing traders should use stocks with average volume
above 500 000 shares per day

Position traders and active midterm investors should prefer to
select stocks that have average trading volume level above
350 000 shares traded per day.

The values described above are minimums that should be used. You
can use higher values. I personally use 500 000 shares level also
for position trades.

Stay tuned for your next email.


Very Respectfully,

Richard Koza
Private stock trader
https://app.getresponse.com/click.html?x=a62b&lc=BCbCG&mc=BF&s=0NyX5&y=A&

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