what is good volume/liquidity to trade?

[jonboy123]

hi, ive read that we should only trade highly liquid (lots of volume) shares.

Are we talking over a million shares per day?
Or is a few hundred thousand a good amount?

Do you guys have thresholds, eg. if volume is less than x amount, stay away.

cheers.

 

[Rhody Trader]

It depends on how large you want to trade and how frequently. The fewer shares you trade, the less liquid a market you require because your small transactions won't move the market. Aside from that, look to the bid/ask spread. If it's wide then you may want to stay away, but that's really only a consideration if you're a relatively high frequency trader.

As a basic rule of thumb, look to the intraday price chart of say 10 minute or so bars. If you see a lot of gapping around then you're looking at a thinly traded market.

 

[jonboy123]

It depends on how large you want to trade and how frequently. The fewer shares you trade, the less liquid a market you require because your small transactions won't move the market. Aside from that, look to the bid/ask spread. If it's wide then you may want to stay away, but that's really only a consideration if you're a relatively high frequency trader.

As a basic rule of thumb, look to the intraday price chart of say 10 minute or so bars. If you see a lot of gapping around then you're looking at a thinly traded market.

thanks.
Gapping around?

Intraday, is just a candlestick chart, but at every 10min intervals?

What does thinly traded market mean?

on some intraday or even daily charts, on some sections, theres like nothing there, just like hypens....what does this mean? no movement and no volume? bad sign?

 

[Rhody Trader]

Gapping Around: No continuity between prices. Price is jumping rather than flowing from point to point.

Intraday: Charts with bar/candle timeframes of less than 1 day, such at 60 minutes, 30 minutes, 5 minutes, etc.

Thinly traded: Low volume and/or low participation (meaning number of traders active in the market at a given point - generally observed via low trade frequency).

Hyphens on the chart generally means no price movement - probably not a market you want to trade if your strategy is based on price change.

 

[jonboy123]

thankyou.
So i guess gapping intraday is a bad sign.

about checking how liquid shares were today.
The volume information.

Im seeing conflicting figs on diff sites when comparing figs for a company.

FOr example: yahoo finace says VOLUME is 70,000 (for today i presume)
does this mean 70,000 TRADES were made? or does it mean 70,000 SHARES exchanged hands??? the latter could be just one huge trade then, in theory.

So i would say the No. of trades per day is more accurate of volume figure.....right?

the same company could say 2mill was volume, on a diff site.

Are some sites unreliable?

 

[Rhody Trader]

Im seeing conflicting figs on diff sites when comparing figs for a company.

FOr example: yahoo finace says VOLUME is 70,000 (for today i presume)
does this mean 70,000 TRADES were made? or does it mean 70,000 SHARES exchanged hands??? the latter could be just one huge trade then, in theory.

So i would say the No. of trades per day is more accurate of volume figure.....right?

the same company could say 2mill was volume, on a diff site.

Are some sites unreliable?

When you see a volume figure quoted that is almost always going to be shares traded, not transactions done (unless specifically indicated otherwise). While it might be nice to know the number of trades, the volume is a more meaningful metric. It tells you how much money is moving through the stock.

As for certain sites being more or less reliable, anything which uses the exchange volume should be mostly correct. Just make sure you're comparing apples to apples.

 

[DeadMoney]

I am trying to find information on the volume of futures indexes to trade.

I have found something that pretty much works on the s&p right on the open, and I am looking to see if I can get it to work with other markets. But having a lot of trouble finding any futures volume information.