by Larry Swing - September 11 2005

Education

As an investor, you may have reasons for entering a trade that do not require you to enter the trade immediately.  If this is the case, then there are a number of ways that you may make your transactions cheaper.

There are several ways to enter a position effectively. 

Place Orders Incrementally

If the position is to be large in comparison to the average traded volume, then entering the position should be spread out over several hours or days.  Simply placing a 10,000 share limit order on an illiquid stock is asking for smaller orders to jump in front of you.  Break your orders into reasonable sizes.  Similarly, selling a set number of shares every minute might tip off traders, who will then front-run the remainder of your orders.  It is a good idea to place orders of different sizes and after different time increments.

Anticipate Liquidity

Different times provide varying amounts of liquidity that your orders may access.  For example, there is good liquidity on the opening print on NYSE equities. 

There exists high liquidity during the first and last periods of the day - the middle 4 hours of trading days do not usually have much trading activity, and thus entering a position may be expensive due to high spreads and low volume.

Other periods that have high liquidity may be anticipated.  There is often high liquidity on the days following earnings or other corporate announcements.  Wednesdays and Thursdays have higher than average liquidity; Monday's have lower than average liquidity.

Use Alternative Vehicles

If you find a stock to be an attractive long-term buy, consider buying that stock and some similar stocks rather than only that one stock.  Transacting in several stocks is likely to be cheaper than transacting in only one stock.

If you want to buy an index of stocks, you are likely to be better off transacting in an ETF or buying a low-cost mutual fund than buying all stocks that compose the index.

Analyses of ETFs

BBH:  Bullish.  (Biotechnology)

SwingTracker
MrSwings Real-Time Stock Charts RISK-FREE TRIAL featuring one-click access to Larry Swing's profit-generating indicators - Force Index, EquiVolume, True Strength Index

BDH:  Neutral.  (Broadband)

BHH:  Neutral.  (Business to Business)

EKH:  Neutral.  (European Stocks)

HHH:  Neutral.  (Internet)

IAH:  Neutral.  (Internet Architecture)

IIH:   Neutral.  (Internet Infrastructure)

OIH:  Neutral.  (Oil Services)

PPH:  Bearish.  (Pharmaceuticals)

RKH:  Neutral.  (Regional Banks)

RTH:  Bullish.  (Retail)

SwingTracker
MrSwings Real-Time Stock Charts RISK-FREE TRIAL featuring one-click access to Larry Swing's profit-generating indicators - Force Index, EquiVolume, True Strength Index

SMH:  Neutral.  (Semiconductors)

SWH:  Neutral.  (Software)

TTH:  Neutral.  (Telecommunications)

UTH:  Neutral.  (Utilities)

WMH:  Neutral.  (Wireless)