In order for a bar, say a time based bar which is what most traders look at afaik, to have meaning it has to have a certain amount of input, a certain amount of trades in it... if you have a thinly traded instrument you will have to back off your time frame in order to have enough input per bar to be meaningful. That can mean daily and weekly bars sometimes and if that is the case it entails holding overnight. Holding a really easy to manipulate issue overnight is not my idea of a good time but you can offset things by trading a bunch of different issues and hope that they are not all correlated in the case of some kind of financial disaster... so it sort of takes balls to trade these things but wait, there is an upside, there is an inverse correlation between a stock price and the average percent gain of the typical big move. Noise is noise and big moves are different from noise, thus, if you research such things you want to separate your tests from the noise and just focus on the bigger moves...
if it's stocks you are looking at you are going to find that the problems of trading low priced [most low volume stocks are also low priced] issues are that you can't short them, sometimes you can't trade them at all, especially if they are OTC. The rules for OTC are mind bogglingly simple in some regards, heads the market maker wins and tails you lose is what they seem to boil down to.. imo they are untradeable or at least I never was able to get it done... huge potential gains on paper but your limit order CAN be traded through, left in the dust and it's within the rules.. my advice is to steer clear of OTC... low priced equivalent priced issues on the NASDAQ make bigger moves than on the AMEX or the NYSE so if you are looking for the sweet spot for low priced issues it's NASDAQ, over $5.. Under $5 means not allowed for shorting with some brokers, or maybe it's all of them, not sure on that... but as the price goes downward the moves to the long side become greater and if you can find an issue trading under a buck with enough volume to be tradeable that has not been delisted it can be dynamite...
As you get into the lower prices the number of shares per equivalent dollar amount is greater so you want to use a broker that charges by the trade perhaps, not by the share... I did all my research years ago and I can't quite recall what, or if, I found anything regarding tradeable moves versus the overall market.. with higher priced and more attractive investment grade issues, their best trades come with the big overall market moves like we had earlier this year.. that is one of the problems with O'Neil's research, most of his trades all happened together, you read the book and think "wow, I can really make some steady money, but not really, the trades are clumped together timewise.... Finding swing trades when there is not a big overall move on can be sketchy, I can't recall if they were more abundant in the lower cost issues or not... I seem to recall that they were less dependent on overall market conditions, any researcher worth his salt can fire up Excel with some stock data and find out for himself, I lost track of the spreadsheets and all the research years ago, I'm just daytrading index futures now, stocks are SUCH A HUGE HASSLE, you need a screener, you need to watch the news feeds on everything in your portfolio, you need to just do so much to manage a basket of stocks that I learned to hate it big time, but I was also working full time at the time.. I might try it again some time but not too soon...
Happy Trading...
