Lesson Four on Market Fundamentals
#education 17/24
Keep in mind that stocks with low liquidity
can have a wider spread because they may not
be traded frequently.
It is
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And for some stocks, the bid-ask spread
doesn't vary much. That's because some stocks are
subject to high research, and their performance is consistent.
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If you're day trading, the bid price
and the ask price are crucial as the spread can
significantly impact your daily profits.
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Also, keep in mind that if you're tracking the price
of something on a website, you're only seeing
another batch price for that stock. You might pay more or
less if you decide to buy.
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Checklist
What affects the spread?
Availability - how easy it is to trade a company's
stock.
Volume - if a large quantity of shares is
traded quickly.
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Checklist
What affects the spread?
Popularity - high-priced stocks can have a large spread.
Market volatility - whether it’s bad or good news,
or economic or company-specific.
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Watch the gap!
The difference between the bid
and ask has narrowed over the years for investors. This is partly
due to technology and increasing demand, which helps to
reduce costs.
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Watch the gap!
This means that more of what you invest ultimately
contributes to long-term stock market performance.