posted
My question is concerned with the bid/ask price. Iv been reading this book on bid and ask, kinda confusing.I was wanted to know if iam on the right track or still confused, if someone could clear these up for me that would be great.
True or False 1) If the Bid/Ask spread is fairly large this is an indication of a runner?Always true or not always? Or would bid/ask also have to rise along with this large spread?
2)I've read some posts on this forum that say look for increasing bid and ask. Shouldnt i be looking for increasing Ask only? as there more buyers this way... if its both ask and bid rise doesnt that mean that its an equal amount of Sellers and Buyers?
posted
As a experienced trader let me try to clear this up....a stock that has a large spread (or big difference in bid and ask) for example stock ABC's bid is .012 and ask is .018...THIS IS NOT GOOD and here is why. YOU have to BUY the shares at the ASK price (usually) so you would buy at .018, AT the MOMENT you buy you can turn around and SELL the shares you just got at .012 or the bid (you cant sell at the ask price remember) SOOOO basically you would be actually down right off the bat and you would need to BID to increase 50% just to break even on your initial .018 buy price. Now enturn if you see a stock ABC that has big of .017 and ask of .018 and you BUY at the ask of .018 you can sell at .017 right off the bat and not realy lose anything if the stock does not go up. NOW for both examples you would hope if a lot of buying comes in the ask and bid will go up...BUT if buys come in and only the ASK goes up and the bid still stays LOWER..then my friend you are trapped and so is everyone else who is buying at a high ask because remember you can only sell at the BID price.
To answer your last part...The MM or market makers can almost control the price of stocks, MOST OF THE TIME if a lot of buys come in the BID will go up and the ASK will go up as well, this is when a stock is running or maybe even breaking out. BUT CAUTION if just the ASK is going up...then stay clear
posted
Never pay the ask price if you can help it (course you might also miss out on a run). Try for somewhere between bid and ask, for example. You might get it, you might not. You might have to lean more towards the ask side. It IS possible even to SELL at the ASK. I did it with 77% of my JRVR --sold at .0003-- at a loss though (but it's a good thing I did because of the reverse split) so it does happen, occasionally. Pick your price and try to get it, if it doesnt go through, up it.
[This message has been edited by Phoenixx (edited November 22, 2004).]
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