When is it "correct" to trade at the midpoint?

Discussion in 'Trading' started by clearinghouse, Dec 5, 2011.

  1. Two scenarios:

    1) Cheap, thick stocks, and
    2) Expensive socks

    When is it optimal to use the midpoint in #1, and when is it optimal to use the midpoint in #2?

    This is an open-ended question, just curious if anyone has a strong opinion on midpoints.
  2. If by midpoint you mean the midpoint between the bid and the ask, and the reason you're asking this is in reference to wide bid-ask spreads, it is never "correct" in my opinion. Personally, I would just trade something else.
  3. apage

    apage Guest

    How many shares are you trading and how quick/long are you holding the shares?
  4. i'm more into the technical side: what platform are you using to execute your mid point orders?
  5. What about thick stocks with 20k+ shares per side? There is a lot of midpoint volume in these stocks.
  6. There are many factors at play here. As per apage, the intended duration of the trade and number of shares being traded must be considered. The momentum and volatility of the market, and the relationships between your entries and exits price range wise may also play a role in this. There may be situations in which wide spreads don't matter and bidding at mark is totally fine, in other situations tight spreads may be critical. Sounds like you're dealing former. As for myself, I don't have that luxury. Do whatever suits you best.