The Spread

 I love when I ask good questions. I probably ask more relevant questions than I know, but it's nice to have someone else say that I asked a good question. This morning I asked about how a stock moves normally and my question was approved as a good one which honestly felt like quite the compliment since it was coming from quite the tenured trader (probably been trading for 20ish years almost? and is the co-founder of a prop firm). Anyway I want to talk about my question because it has to do with how certain stocks trade and that item is the spread.  I believe most people call it the spread? maybe it is referred to as gaps? But I will be calling the space between the bid and the ask "the spread."  So a stock was being discussed this morning and It was on my radar to begin with, but I was hesitant to trade it because the spread was 30+ cents  - very spready.  it would pull in from time to time but immediately spread back out.  Anyway, the question I had was whether or not this stock trades with this kind of spread, or we can expect it to tighten up. I asked this because well, I've traded long enough to know stocks act differently and that is really the moral of this little post - Remember - stocks act differently! What I've seen is that in the premarket things can have a pretty wide spread and sometimes in the first 5-10 minutes the spread remains kind of wide but then it pulls tight and trades tighter (maybe after it's decided where it wants to go).  I'm not a huge fan a trading things with a wide spread, but I think if you can learn how to deal with it - sometimes it can be advantageous.  One of the things I've also notices is that you'll find wider spread in stocks with either, lower float - so lower number of shares available, or are penny stocks, or very high priced stocks.  I honestly don't look at stocks that aren't getting a lot of volume so take note of that. I'm sure that stocks with lower volume would act differently but I tend towards liquidity (lots of trading going on). I think it's interesting that some MegaCap stock with tons of shares at very high prices will trade similarly to penny stocks in that they touch a ton of prices and zip lower and high with large price spreads.  With stocks like this I think that it is important to be patient and do you best to not jump the spread but rather let prices come to you. If they (prices) don't then it's not your trade. Of course if you method requires you to jump the spread for some reason - you do you. I've just found that fighting for the price you want (with patience sometimes) ends up giving me prices that I want. So with all that said, I want to add that I like trading stocks that move quickly, but don't have a wide spread.  The advantage of this is that I can usually get out or in at any price with relative ease. This means less risk. Less risk is good. Ok. That's all I've got for now. What have you notices about the spread? What works for you? Have a great day or night wherever you are! Cheers!