As already said, each trader has his own style ( or should have ).
So it's up to him, what he wants to trade.
However, there are some characteristics inherent in less volatile stocks, which may give the trader ( not the speculator ) some odds over the long run :
Trading highly volatile stocks demand much stricter risk control than average or below average beta stocks. ( Unless you're a gambler ).
The only way to implement this risk-control without getting whiggled out of your position dozends of times, is to reduce your positionsize and use wider stops.
The necessary, low-risk, volatility adjusted positionsize for such stocks is sometimes much smaller than most daytraders would expect. Sometimes, depending on the traded stock, account size and %risk model, a trader will end up with odd lots.
Although a trader might have larger point gains per share in high beta stocks, this effect is partially offset by the smaller position size.
Low beta, highly liquid issues offer
1.the possibility to "wield a larger sword" - meaning much larger positions, without violating %risk model as compared to high beta stocks and without setting stops so tight, that the trade inevitably gets stopped out several times before a profit can be realized.
2. the possibility to take on larger positionsizes without more risk as with high beta stocks offers the advantage of implementing scale in / out strategies
( see praetorian2 posts , although I admit, he's not really in the most liquid stocks most of the time ;-) )
3. highly liquid, below average beta stocks offer, most of the time, more "predictable" price patterns and do react more favourably to many standard technical indicators.
4. Many low beta stocks ( although you'll find them also among NASDAQ stocks ) are traded at the NYSE - a market which is considered to be "fair" for the trader, at least compared to the mumbo-jumbo poker games played in many Nasdaq names by MM's.
5. Evtl. a trader has less stress by avoiding the daily emotion-rollercoaster inherent in trading high beta stocks.
As a private trader, one should always strive to enhance his odds as far as possible, thereby he has to admit towards himself, that his options to do so are rather limited. But certainly, he could start with avoiding all of those and conditions which raise the barriers for him.
Live is hard enough - so one shouldn't try to make it even harder.
Of course, if one feels enjoyed by wildly oscillating ups & downs in his trading account ( equity curve looking similar to the charts of those high beta stocks ) - than this is the way to go.
If you're in for consistent money-making, select your trading vehicle very carefully.
There's no way to "control" the market ( unless you're in with real size on thinly traded stocks )
Just my HO
So it's up to him, what he wants to trade.
However, there are some characteristics inherent in less volatile stocks, which may give the trader ( not the speculator ) some odds over the long run :
Trading highly volatile stocks demand much stricter risk control than average or below average beta stocks. ( Unless you're a gambler ).
The only way to implement this risk-control without getting whiggled out of your position dozends of times, is to reduce your positionsize and use wider stops.
The necessary, low-risk, volatility adjusted positionsize for such stocks is sometimes much smaller than most daytraders would expect. Sometimes, depending on the traded stock, account size and %risk model, a trader will end up with odd lots.
Although a trader might have larger point gains per share in high beta stocks, this effect is partially offset by the smaller position size.
Low beta, highly liquid issues offer
1.the possibility to "wield a larger sword" - meaning much larger positions, without violating %risk model as compared to high beta stocks and without setting stops so tight, that the trade inevitably gets stopped out several times before a profit can be realized.
2. the possibility to take on larger positionsizes without more risk as with high beta stocks offers the advantage of implementing scale in / out strategies
( see praetorian2 posts , although I admit, he's not really in the most liquid stocks most of the time ;-) )
3. highly liquid, below average beta stocks offer, most of the time, more "predictable" price patterns and do react more favourably to many standard technical indicators.
4. Many low beta stocks ( although you'll find them also among NASDAQ stocks ) are traded at the NYSE - a market which is considered to be "fair" for the trader, at least compared to the mumbo-jumbo poker games played in many Nasdaq names by MM's.
5. Evtl. a trader has less stress by avoiding the daily emotion-rollercoaster inherent in trading high beta stocks.
As a private trader, one should always strive to enhance his odds as far as possible, thereby he has to admit towards himself, that his options to do so are rather limited. But certainly, he could start with avoiding all of those and conditions which raise the barriers for him.
Live is hard enough - so one shouldn't try to make it even harder.
Of course, if one feels enjoyed by wildly oscillating ups & downs in his trading account ( equity curve looking similar to the charts of those high beta stocks ) - than this is the way to go.
If you're in for consistent money-making, select your trading vehicle very carefully.
There's no way to "control" the market ( unless you're in with real size on thinly traded stocks )
Just my HO
