V.3:3 (121-121): Trading Liquidity: A Parameter for Technical Analysis by Scott J. Levokove and Scott S.
Product Description
Trading Liquidity:
A Parameter for Technical Analysis
by Scott J. Levokove and Scott S. Silver
Trading liquidity is often overlooked as a key technical measurement in the analysis and selection of stocks. The value of technical analysis is often enhanced by taking trading liquidity into account.
Liquidity is a significant consideration because of the effect it has on the price of a security. Other things being equal, a relatively illiquid security should carry a lower price because the holder should be rewarded for bearing the extra risk. The risk involves the lack of ability to trade large blocks of stock without significantly affecting the price.
This article addresses the issue of trading liquidity, and how it relates to the data and calculations on trading activity provided by Gregg Corporation as a regular feature in Technical Analysis of Stocks & Commodities.
Trading activity equals the total volume for a given period expressed as a percentage of the total number of shares outstanding. This value can be thought of as the turnover rate of a firm's shares outstanding and, theoretically, can serve as a good proxy for trading liquidity.
Every two months, Gregg Corporation searches its Tradeline™ Securities Database System for the fifty stocks that have exhibited the greatest trading activity over the most recent two-month period. The Tradeline System contains historical pricing and dividend information plus selected fundamental data for over 70,000 securities including equities, bonds, options, government issues and market indexes. For the trading activity analysis, the screening process is narrowed to common stock issues listed on the major U.S. exchanges.
Trading liquidity is often overlooked as a key technical measurement in the analysis and selection of stocks. The value of technical analysis is often enhanced by taking trading liquidity into account.
Liquidity is a significant consideration because of the effect it has on the price of a security. Other things being equal, a relatively illiquid security should carry a lower price because the holder should be rewarded for bearing the extra risk. The risk involves the lack of ability to trade large blocks of stock without significantly affecting the price.
This article addresses the issue of trading liquidity, and how it relates to the data and calculations on trading activity provided by Gregg Corporation as a regular feature in Technical Analysis of Stocks & Commodities.
Trading activity equals the total volume for a given period expressed as a percentage of the total number of shares outstanding. This value can be thought of as the turnover rate of a firm's shares outstanding and, theoretically, can serve as a good proxy for trading liquidity.
Every two months, Gregg Corporation searches its Tradeline™ Securities Database System for the fifty stocks that have exhibited the greatest trading activity over the most recent two-month period. The Tradeline System contains historical pricing and dividend information plus selected fundamental data for over 70,000 securities including equities, bonds, options, government issues and market indexes. For the trading activity analysis, the screening process is narrowed to common stock issues listed on the major U.S. exchanges.
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