YOU BUY STOCKS BUT CAN'T SELL; How to Identify Liquidity Traps by reading Your Order Book On Your Trading App.
1) THE BID VS THE ASK
Every stock app like Stanbic IBTC Stockbrokers, MeritTrade, or Bamboo shows you two prices:
•The Bid (Buy): The highest price someone is willing to pay to buy the stock from you.
•The Ask/Offer (Sell): The lowest price a seller is willing to accept for the stock.
Now, look at the spread which is the difference between the two:
• If the prices are very close e.g., Bid: 50.00 and Ask: 50.05, this means you can buy or sell instantly all things equal.
•If the prices are far apart e.g., Bid: 45.00 and Ask: 52.00, If you buy at 52 and try to sell immediately, you've already lost 7 per share because the nearest buyer is way down at 45.
2) THE VOLUME TEST
Next to the Bid and Ask prices, you will see numbers like Qty or Volume. This tells you how many shares people actually want.
•If You see thousands or millions of shares being requested e.g., 2,500,000 shares at 12.50. This is a may signal deep market.
•If you see tiny numbers e.g., 50 shares at 12.50. Even if the price looks cheap, you can't buy enough to make it worth it, and you certainly can't sell a large amount without crashing the price.
3) THE FLATLINE CHART
Look at the stock's 1-day or 5-day chart.
•If the line moves in small zig-zags constantly. This shows active trading.
•If the line looks like a series of flat steps or dots with long horizontal lines. This means for hours or even days, nobody bought or sold a single share, and if you enter this Ghost Town, you might not be able to leave oh.
Before you hit BUY, look at the Bid/Ask Spread, the volumes, flat line, float rates, etc, don't pick any one in isolation.
Which stock are you finding hard to sell currently?
1) THE BID VS THE ASK
Every stock app like Stanbic IBTC Stockbrokers, MeritTrade, or Bamboo shows you two prices:
•The Bid (Buy): The highest price someone is willing to pay to buy the stock from you.
•The Ask/Offer (Sell): The lowest price a seller is willing to accept for the stock.
Now, look at the spread which is the difference between the two:
• If the prices are very close e.g., Bid: 50.00 and Ask: 50.05, this means you can buy or sell instantly all things equal.
•If the prices are far apart e.g., Bid: 45.00 and Ask: 52.00, If you buy at 52 and try to sell immediately, you've already lost 7 per share because the nearest buyer is way down at 45.
2) THE VOLUME TEST
Next to the Bid and Ask prices, you will see numbers like Qty or Volume. This tells you how many shares people actually want.
•If You see thousands or millions of shares being requested e.g., 2,500,000 shares at 12.50. This is a may signal deep market.
•If you see tiny numbers e.g., 50 shares at 12.50. Even if the price looks cheap, you can't buy enough to make it worth it, and you certainly can't sell a large amount without crashing the price.
3) THE FLATLINE CHART
Look at the stock's 1-day or 5-day chart.
•If the line moves in small zig-zags constantly. This shows active trading.
•If the line looks like a series of flat steps or dots with long horizontal lines. This means for hours or even days, nobody bought or sold a single share, and if you enter this Ghost Town, you might not be able to leave oh.
Before you hit BUY, look at the Bid/Ask Spread, the volumes, flat line, float rates, etc, don't pick any one in isolation.
Which stock are you finding hard to sell currently?
