Ed in last nights webinar presentation of his NAPS portfolio screened for and measured the average spread across his 18/20 holdings at 1%.
My question to Ed and other investors is at what level do you apply a rule for bid-offer spread? Is it less than 1%, less than 1.5%, 2%, 2.5% ..........?
...... and a follow on from that question is, "are there any strategies that a private investor can use to consistently trade inside the published spread?"
I usually screen for stocks spread below 5%.
The problem is spreads change, even during the same day. At market open they are often wider than after 10am. Also near closing the spread tend to get wider. Bad news on an illiquid stock, spreads will get really wide or no market, so you can't sell. Trading within the published spread is easy, just trade normal size amounts, very small or very trades may go outside the published spread. Trading at busier times should be tighter spreads.
Good advice Rusty2 thank you.
Do you trade within a window of say 10.00am to 3pm? What do you consider " normal size amounts" to be in terms of the £ size of the trade.
No I don't, sometimes I trade as soon as the market opens but it depends on the price. But I'm mindful of the spread.
I believe Robbie Burns (the Naked Trader) only deals after 9am.
Normal amounts depends on the stock, each stock has a range,think it is on the Stockreport somewhere. The issue is more on larger trades which does not affect me, I tend to buy smaller amounts, under £1,000 as I have cheap dealing fees.
I tend to trade before the market opens and my minimum trade is £2,000 using Interactive Investor .
A very practical topic.
I tend only to trade after about 10am, often very early MMs are trying to push the boat out so waiting until things settle is often best. My pal often picks up parcels late in the day when books are being closed.
For myself spreads over 3% are usually a no no, but often this can vary during the day.
Limit trades are often useful in this respect.
Be interested in the answer to the trade before open and after close question!!
It was a link sent to me by a friend who has shown an interest in joining Stockopedia. A marketing tool I suspect albeit a very soft approach. What was interesting was that the presentation was for 1 hour but actually lasted 1 1/2 hours which I believe reflected Ed's passion and belief in the benefits of factor investing. It was very detailed for someone accessing the info for free.
Notable also was that there was no attempt to promote Stockopedia but simply the benefits of factor based investing.
I'm going to be running a NAPS Webinar next week for subscribers - I did a test run on a small group last night in the interest of continuous improvement. Consider it a dress rehearsal. Look out for the invite.
Excellent! I watched all of your webinars when I joined Stockopedia a couple of years ago as they were so informative on both investing and the platform. Great to have another to look forward to.
2% for me, but even that is borderline. I don't like being at a loss the moment I enter a trade. I also use quite tight stop-losses, so a big spread is a no-no.
