Liquidity

[daveylibra]

Hello Forum,

Please excuse the naive questions, but I am hoping that someone can help..
1)
I'm looking to spread-bet LIQUID shares (I guess we all want to find them.) I have been looking at FTSE100 & 250, but to expand my 'pot' of shares I want to look at more of the LSE & possibly NYSE & NASDAQ.
What daily volumes should I look for, approx?
I was thinking of using daily volume SMA(200)> a certain amount for each index?
I'm looking for shares that are worth trading, ie small spread, liquid movement. Am I on the right track?

2) I have read that the markets are manipulated. This I can believe. But some people trade an index, surely this would be just to complex to be manipulated?

 

[timsk]

Hello Forum,

Please excuse the naive questions, but I am hoping that someone can help..
1)
I'm looking to spread-bet LIQUID shares (I guess we all want to find them.) I have been looking at FTSE100 & 250, but to expand my 'pot' of shares I want to look at more of the LSE & possibly NYSE & NASDAQ.
What daily volumes should I look for, approx?
I was thinking of using daily volume SMA(200)> a certain amount for each index?
I'm looking for shares that are worth trading, ie small spread, liquid movement. Am I on the right track?

2) I have read that the markets are manipulated. This I can believe. But some people trade an index, surely this would be just to complex to be manipulated?

Hi daveylibra,
Welcome to T2W.

I don't have access to a spread betting firm that offers equities, but the chances are that any equity instruments they list are likely to be fairly liquid. The reason being that you as their customer are trading against them; they are on the other side of your trade. Therefore, they (i.e. their dealers or algorithms) will make a decision to either carry the risk of your position or to hedge it in the underlying market. If they do the latter, the last thing they want is to be trying to take a position of their own in an illiquid stock - e.g. a 'penny share'.

In your shoes, I'd suggest you focus on the spread which, to a greater or lesser degree, will be dictated by the price and volatility of the instrument. So, if you're planning on trading high priced roller coasters such as Apple and Google - expect the spread to be wide.

Relative to the U.S., FTSE100 shares will, by and large, be less volatile and the spread will be smaller. As a general rule of thumb, the tighter the spread the better. If you plan on trading a basket of equities, then your position sizing and stop placement will be vital. Get this wrong and it's all too easy to find yourself with a net gain at the end of the day, week or month in terms of points made, but with your PnL in the red.

Regarding manipulation, it rather depends what you mean. Allegedly, Al-Qaeda took huge short positions in the S&P500 prior to the 9/11 attack on the twin towers. If that's what you mean by manipulating indices, don't worry about it as there's nothing you can do about it. If it's something that really concerns you, then trading probably isn't the game for you.
Tim.

 

[tomorton]

1) Agree with timsk - SB firms don't even offer books on illiquid shares so that's not a factor, but they do impose wider spreads on smaller caps so they cost more to enter/exit as a round trip. On the other hand, smaller caps can be more volatile so potential gain (but also loss) per hour/day/week can be much more than the blue chips.

2) It doesn't matter whether its faked or not if you trade with the price tendency. Follow the price and get out when the chart tells you price has stopped going in your direction.