Thin Nasdaq stocks

D

dannyglover

Has anyone had any success trading thin Nasdaq stocks (volume less than 100K)?

I'm looking for new tactics and wondering if there was any money to be made there. Or do the market makers have their way with daytraders...
 
Have you traded them at all already?

They jump all over the place, have huge spreads, and it's tough to get a good or quick fill. That being said, I did not try to find an edge in trading them. I decided to trade liquid stocks where at least I could predict that my fills would be close to where I wanted to enter and exit a position. This way, I could more closely stick with my strategies and not have to factor in major slippage.
 
Besides the spread, which you will almost never beat( like buy at bid) , I watch how much size is usually on the b/a. If its always 100 shares or small amounts you may erode much of your profit trying to get out of a larger order.

I always try to avoid thin stocks, just not worth the stress for me, but I see some traders who love them.
 
i have always avoided thin lizzys as a rule of thumb, but every time a "bend" my rules i seem to do well in the thins. idk if this is too small a sample but i am continuing to trade them w/ smaller size to see how it pans out. i feel like its playing w/ fire b/c i have been stuck on the wrong side of these and it hurts, but you can make a lot too...high r/r...
but fyi i only dabble in listed thins, never nasdaq, i feel thin+nasdaq is almost suicidal..... try listed...BELIEVE ME at least there is a watchdog and i have recieved price improvements of over 20 cents and tehn some routinely in this arena, never will you see this in the NAZ
 
Thinly traded Nasdaq stocks are indeed suicide.

I will never forget being stuck in a fairly large position of NVLS about 4 or 5 years ago. NVLS is not even really a thin stock compared to so many. But because it was at lunch time, there were virtually no trades going off. The spread was large enough that if I could have sold at the offer, I would have made that one trade a very profitable day. If I sold at the bid, I was a big loser on the day.

For one of the longest hours of my day trading career, I sat and tried to get a fill somewhere in the middle. I had an Instinet terminal on my desk as well as a level 2. I would put out an order in Inca. It would time out. Try Select Net, cancel. Try Inca again. Etc.

I learned two things that day. Don't trade thin issues. And don't trade at noon.

And of course, to make it all worse, I was absolutely starving at the time, but couldn't walk away to get food.

I am sure there are traders here that remember PRST, when it could have a $20 or $30 spread. Novellus was never quite that crazy, but no one I ever knew of traded PRST in size. (what ever became of PRST? Is it now a penny stock?)

Bottom line....like everyone here says.....trade thick stocks. There is no way to win when you are subjected to huge spreads and greedy market makers. And maybe it isn't even that they are so greedy. It's hard even for them to trade those stocks. That's why the large spreads. Low volume should be self explanatory.

Look at the pink sheets (if they still exist). Take a look at the spreads there. No buyers, no sellers. HUGE spreads. Maybe a 3 cent spread doesn't sound so big, but if the market is $.01 x $.04, well tripling the bid to break even seems a bit rough.

Stick with the easy stuff. Trade listed...Trade BRK with a $600 spread, and get it out of your system.

:)rs7
 
Quote from gaj:

trade it like a market maker would, then.

seriously.
More...

paper trade it through one of the software platforms that mark your trades to market, and see just how your actual trades might turn out....

you'll find that the arguement works well, academically, but in reality, with actual money, time, execution and transaction costs involved, that the idea might be better left alone...
 
i periodically trade thin nas stocks which have activity that day...

so, yes, i do have that qualifier there.

some people claim that they can read certain major MMs in them easily, because they're the 'junior' people and don't play as many games. i can't read that action easily, however...
 
You must log in or register to reply here.
Back
Top