posted
The low volume stocks can have huge spreads. If you buy a low volume stock make sure you use a limit order. If you buy with a market order the spread could be over 5%!!
Alot of stocks with high volume but low share count will not have a large spread but have high volatility.
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posted
Alot of times the MM's wil cause a large spread to control how fast a stock moves. If your looking at a stock with a difference of 25-30% between the bid and ask your gonna think about getting in as in theory you already hav a big loss if you want to get right back out. JMHO
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Associated Press Report: Ex-NYSE Traders Face Indictment Tuesday April 12, 8:52 am ET Report: Ex-NYSE Specialists to Be Indicted on Charges Trades Benefited Firms, Not Customers
NEW YORK (AP) -- Several former New York Stock Exchange traders who oversaw stock auctions on the floor are expected to be indicted on charges that they traded to benefit their firms at the expense of their customers, The Wall Street Journal reported Tuesday.
The newspaper, citing unidentified people familiar with the matter, also said the Securities and Exchange Commission is expected to file and settle civil charges against the New York Stock Exchange for allegedly not properly policing floor traders.
The Journal said the settlement will require the NYSE to set aside $20 million over several years to beef up the exchange's market-surveillance and regulatory programs.
An NYSE spokesman declined comment to the newspaper.
The criminal probe of the NYSE traders by federal prosecutors grew out of a civil case against specialist firms that employ the traders, the Journal said. Their job is to keep trading orderly by handling trades for customers.
Last year, NYSE specialist firms paid a total of $247 million to settle charges that their employees interfered with customer orders so they could trade their firm's own money, taking advantage of their knowledge of which way the market was moving.
Specialists match buy and sell orders for customers of the stocks they oversee and use their firm's money to buy shares when nobody else wants to buy and to sell shares from their own inventory when nobody else wants to sell.
The SEC also is expected to file civil securities-fraud charges against more than a dozen former specialists, including onetime employees of four of the Big Board's five major specialist firms, The Journal said.
-------------------- Marty When I was born, I was granted a visitors pass to earth. I will enjoy everyday until it has expired. You should too ;)
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posted
So, the equation is Low Vol + Low Float = Wide Spread. I added the vol cause I noticed the spread is going tight when vol increase, but still a dif. on a Low Float stock. Thx.
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posted
in the old days it was because the MM's kept it artificially wide to profit from it till the SEC changed the rules.. below are two books that tell the story on how the daytraders changed how we trade by taking on the MM's till finally the SEC had to step in..
posted
had a buddy from all the way back to elem school that did this too...back in '01...no it wasn't Livermore...from The Daytraders.. There's a chapter devoted to the bucket-shop wizard of the Gilded Age, the first day trading master, Jesse Livermore, whose penetrating insights are gospel for many traders (and immortalized in Edwin Lefèvre's Reminiscences of a Stock Operator). Both Livermore and a recent Atlanta day trader blew their brains out in the end, the latter taking several other day traders with him.
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