The age of online trading has made almost all stock easy to trade, sometimes too easy – with just a click to pick.
But, a significant difference exists between EASY stocks and PROFITABLE stocks.
A combination of liquidity and tight bid/ask spreads make both entry and exit easy. Typical one cent spreads illustrate a plethora of buyers looking to get in when you want to get out and sellers wanting to get out when you want to get in.
Deep pools of market participants ensure that a trading plan with risk control can be executed efficiently.
A look at the top volume at any financial site is a place to start when choosing the most liquid stocks. However, high volume does not necessarily mean tight spreads. This is illustrated by action in the FANG stocks (Facebook, Apple or Amazon, Netflix, and Google) that may not be as smooth to enter and exit.
Blue Chips like Coca-Cola, Microsoft or General Electric are often much less dynamic with reduced price volatility. The tradeoff for that stability is the reward may not be as great as the high flyer stock.
Large institutional and fund positioning also makes a stock easier to trade with the backstop of their book.
Exchange Traded Funds based on major stock indexes typically are some of the most actively traded markets. The DIAmond’s, SPYders, and QQQ’s are not only very liquid but also diverse so they have less individual stock risk.
Commodity ETFs like GLD for Gold and XLE for Energy offer direct investment in the resources building blocks of the economy.
While liquidity is a KEY FOR EASE in trading markets that doesn’t necessarily translate into making money…
It is often said, “It isn’t what you trade but how that is most important.”
A disciplined thought out trading plan is the EASIEST path to stock success.
