Hi can anybody tell me a minimum trading volume to set for a screen using average 3 month to ensure the stock is actively tradable?
Hi patbe,
I dont use a pure momentum strategy however I use average volume in my quality/value/momentum & quality/growth/momentum strategies to ensure I'm not stuck with an illiquid stock.
I use "3m average volume > 40000"
I also avoid stocks with a large spread ... another sign of an illiquid stock.
I use "spread (bps) < 500"
Hope that helps
Phil
Thanks Phil I should've tagged this to stock picks rather than momentum strategy!
I was reading an article on Citywire David Kemptons tips for 2014: http://citywire.co.uk/money/investment-tips-for-2014-citywire-writers-picks/a727318?ref=citywire-money-highlights-of-the-week-list
and one of his tips Empresaria (EMPR.L) appears in my stockscreen but he states that it has a small trading volume and not easy to trade but due to special circumstances it was a tip!
Just wondered if there was a figure or range to highlight illiquid stocks.
Thanks again
Pat
Decide how much of the market you want to be and size accordingly. For example, if your lot size is £5000 and you don't want to be more than 10% of the market, you need daily volumes of £50000 as a rule of thumb.
Also note that the volume data you see may be wrong, markets are fragmented and reporting may be haphazard, you can check the Fidessa's excellent Fragulator http://fragmentation.fidessa.com/fragulator/ for a broader view.
Hey cig I've just realised what I was looking at with the Fragulator and I thought stock trades were all open and then I find some traders trying to minimise the impact of their trades using the likes of dark trading!
