Newby investor Bid/ Ask/StopLoss. I’ll take a shot at explaining what I’ve learned over the past 20 years or so here. Full disclosure self-taught qualified investor no courses or fancy chart names. First of all the numbers that most investors see (that do not pay for live level II) are a few minutes behind.
There are 2 columns that I watch on the bid the Volume and the Price. Example 5000 at 10.05, means that someone is willing to pay $10.05 cents for 5000 shares, next to that is market maker that is trying to buy those shares. But honestly it doesn’t really mean what they publish, there are ways that you can bid on 5000 shares and only show 100 at a time. If you watch the shares that are sold, small amounts of less than 100 do not get reflected in the price, so if you see sales of 21 or whatever more than likely someone is seeing if there is really more than the 100 shown.
On the Ask side that is what someone is willing to sell for. 1000 shares at 10.25. Again it doesn’t really mean what you are seeing. Sometimes shorts will put up a large number to try and put a cap 25000 shares at 10.25 but once folks start buying those 5000 shares they pull it back.
If anyone that is buying large blocks or scared to do it yourself, just call your broker and pay them a couple hundred bucks to do it for you. Back in the day when I first started investing one had to pay a fee for every trade I think it was $200 bucks, so traders would only trade if they were making more than that, we had to keep track of your fees for income taxe etc.
I don’t use stop losses but let me take a shot at how they work. Lets say that you bought Lightwave for $8.00 and it goes over $10.50. So you try to lock in your profits and put in a stoploss at $10.20. Sounds like a good idea, but what really happens it that those who have shorted the stock at a higher price (that means they sold shares they don’t own) will sell it down and Shake the tree for loose shares to buy it back cheaper. Your shares will be sold “at Market” which means just sell them no matter what the price. If you have a company trading 100’s of millions per day probably a good strategy but here with 1 million shares per day they can and will shake it few times a day. So one would end up selling your shares for 9.80 then ½ hour later it is back up and you end up chasing it up to 10.25.
I hope that helps some of you.
I always have trouble buying on a dip because everyone is inline ahead of me. Proly the best way to buy on a dip is to put in a buy with a Limit order 4-5% below what it is trading at any given time and let it ride.
If you want in and want in now the only sure way to get shares is to Buy at the Ask.
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