Liquidity. Where'd it go? Remember when you used to push the button,
trying to buy a few thousand shares of something and you got it instantly?
Well now you are hearing complaints that they are pressing the buttons to
buy 4000 shares and they are getting filled on 500. What's up with that?
Back in the joy days of 98, 99 and early 2000 there were so many people
playing in the market that there were shares everywhere. If you wanted
some, there was someone there to sell them to you and if you wanted out,
someone was there to buy them, but times have sure changed and we are
seeing something of a liquidity crisis at times. All that means is that
with less people participating, it takes longer to get your order filled
to capacity, and it also means that stocks will move further on less
shares traded.
Back in the hey day, you couldn't move DELL with a 200K share block. Now
we see times during the mid-afternoon when a couple 10K orders sends the
thing flying (or sinking). Up until recently, the lack of liquidity hasn't
been too much of a problem. We tend to trade lots of 1000 shares. It's
what we were "brought up with" so to speak and it's what we are
comfortable managing. Well we don't have "problems" at that level yet, but
you can see that it is often taking quite a while longer to get your fill
even at 1000. Sometimes instead of hitting the button and seeing your
screen read "1000 shares of XYZ purchased at 57.75" you see 250 shares
purchased" then immediately afterwards "200 shares purchased" and then
again another fill, this is a telltale sign that there simply isn't the
supply of fast moving shares to cover a silly 1000 share buy quickly.
For those of you who generally play lots of 5k or 10K shares, it is
getting nasty. We watched a trader try and buy 4,000 shares and only got
550 . He was upset because he wanted all 4K, but wasn't willing to buy in
500 share lots at separate prices. So, is the lack of liquidity something
to be really concerned about? We don't think so unless you do the bigger
lots. Right now we are still "okay' with the fills at 1K shares. But
naturally if things get any worse, your best bet is going to be buying
smaller lots.
If you are finding trouble getting orders filled, first try using the
Island ECN, they carry an awful lot of traffic, if you still aren't happy,
buy 400 shares or 600 shares instead of 1000. In general terms smaller
lots will indeed get faster fills. Oh, and just a note: you will have
better luck getting filled on "even round numbers" better than odd ones.
In other words, often you will fill an order for 600 shares faster than
500 or 400 shares faster than 300. We haven't done the research as to why
this happens, but it certainly seems to, and the traders we talk to, seem
to agree. For more tips and plays:
http://lb.bcentral.com/ex/manage/sub...stomerid=12826
