Trading stocks that have wide spreads

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nwoptions

Hi everyone, I'm new to trading. I've been paper trading stocks for awhile now. I trade base breakouts using the CANSLIM methodology from Investor's Business Daily.

I've noticed that most stocks that appear on IBD's "Stocks on the Move" list have extremely wide spreads between the bid and ask price. For instance, TKR is on Friday's list. Its bid is $49 and the ask is $79. That's a $30 spread. Would I be insane to trade such a stock?

I learned that when trading options, I should trade options that have a tight spread of 5 cents per share.

Do you trade stocks with wide spreads? Should I just avoid them all together?

What would be an acceptable spread to you?

Thanks
 
Last edited:
nwoptions said:
Hi everyone, I'm new to trading. I've been paper trading stocks for awhile now. I trade base breakouts using the CANSLIM methodology from Investor's Business Daily.

I've noticed that most stocks that appear on IBD's "Stocks on the Move" list have extremely wide spreads between the bid and ask price. For instance, TKR is on Friday's list. Its bid is $49 and the ask is $79. That's a $30 spread. Would I be insane to trade such a stock?

I learned that when trading options, I should trade options that have a tight spread of 5 cents per share.

Do you trade stocks with wide spreads? Should I just avoid them all together?

What would be an acceptable spread to you?

Thanks
More...

The spread is one of the "costs" you have to overcome. The greater your obstacles, the less likely you are to succeed.

If you have a LOT of confidence/high hopes in your fundamental play, perhaps you can overcome a large spread. If that's not your thinking, you should pass on the play.
 
Obviously, if you want to make a profit in a day trade,
there needs to be a spread so that you can buy low
and sell high.

You need to look at whatever indicators matter to you,
I usually look at historical data for prices, and do the
math.

If you are concerned about spending $49, then find a
lower price stock. It doesn't matter how much it costs,
just how much profit you can potentially earn.
 

You're right to carefully consider and calculate the costs of any spreads before you take off on a trading strategy.

You'll need a solid system, and very good skills, to overcome the drag of spreads and fees.

Traders often fail to include realistic spreads in their plans, then find out later that those costs put them in the hole, or at breakeven, after months or slugging away on even a good system.
 
nwoptions said:
Hi everyone, I'm new to trading. I've been paper trading stocks for awhile now. I trade base breakouts using the CANSLIM methodology from Investor's Business Daily.

I've noticed that most stocks that appear on IBD's "Stocks on the Move" list have extremely wide spreads between the bid and ask price. For instance, TKR is on Friday's list. Its bid is $49 and the ask is $79. That's a $30 spread. Would I be insane to trade such a stock?

I learned that when trading options, I should trade options that have a tight spread of 5 cents per share.

Do you trade stocks with wide spreads? Should I just avoid them all together?

What would be an acceptable spread to you?

Thanks
More...
%%
NO, but looks like you looked @ quote end of day\expired+ never accurate.
More like noon time, bid $77.98 /ask= $78.05. [Av day volume=500k]
Some of mine have a 1% spread; some dont;
again that's[$30] an error for that bid\ ask
Nice uptrend from 1974.
Thanks for the question; IBD books are for cash stocks + related \ not options.
 
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