Value Microcaps Pick Six Lotto 03

[lentinman]

LIQUIDITY

We are not going to have a rule that requires that any stock you pick have X amount of shares traded on a daily average or X amount of dollars traded on a daily average.

However... YOU NEED TO RECOGNIZE THAT YOU ARE AT A GREAT DISADVANTAGE IF YOU PICK STOCKS THAT HAVE POOR LIQUIDITY!

Here are the two rules in the Ibox that pertain to this issue. Both were in place in PSL3. Very few people had any negative consequences from these two rules, but I want to make sure I highlight them ahead of time so that everyone will take a look at the liquidity issue before they pick their stocks and before they go to make a transaction and realize they have problems. After all, we look at the liquidity before we buy a stock in real life. You should do so here as well.

15) The 15% rule is designed specifically to discourage picking stocks that have low liquidity. If, after a sell or freeze, a stock trades below the 15% parameter on the first trade of the next day on no news, the person will be given the option by the end of the day to take the lower opening price. They use up a transaction either way - whether they opt for the lower price or not. Thus risk is associated with shooting the moon on a potentially bogus trade. The same rule applies if, after a buy, a stock trades above the 15% parameter on the first trade of the next day on no news, the person will be given the option by the end of the day to take the higher opening price. This will also use up a transaction - whether they opt for the higher price or not. In any case, if the next trading day goes by and no trades have been made on the stock, the trade does not go through and no transaction is charged to the contestant.

16) You cannot make a transaction on ANY stock that had no trades the day you did it. The reason is because any stock that doesn't trade on day 1 is far more likely not to trade on day 2. If a person is "trapped" by a stock that never trades, they will be less likely (hopefully much less likely) to pick such a stock in their pick six.

If you have questions about these two rules, please ask. But, no matter what, I hope it is clear that they discourage the picking of stocks that don't have trades every day. If you pick a stock that rarely moves, you are putting handcuffs on yourself. But, it is your choice.

PSL contests are designed to reflect real life as best as possible. Despite the fact that the vast majority of stocks that we own have enough liquidity, I'm sure almost all of us own one-to-several stocks with poor liquidity. And, in real life, maybe we can wait them out. But, in PSL, you may not have time to wait them out. Better that you pick stocks that you can freely trade if you so desire.

Len