I've heard a few of the more experienced traders around here say they mainly focus on stocks that are priced between about $1-$5. When I look into it though, the possible percentage of return is about the same within similar time-frames with a lot of different types of stocks regardless of price. This has me worried that I'm missing something. Am I? Or, is it just a preferance thing.
Does Price Matter?
Preference I like both. The cheaper one moves in cents and the more expensive move in dollars. See KO compared to PCLN
I can't speak for everyone but most of the underlyings I trade around are not in that price range. Not that I really care but I think it has more to do with liquidity and there just aren't that many below 5-10$ that trade enough to maintain a tight bid/ask spread on OTM options.
I trade anything setting up how I like. $2, $20, $200, doesn't really matter, but a $2 can jump to 2.20 for 10% in a just a few minutes/hours where it may take days for a $200 stock to go to $220. The float, short interest, sector hype can all be a factor. However in the general sense, I use higher priced stocks for swings and lower priced stocks for day-trades. Of course anything could really happen, but that's usually a starting point in my planning if I like the stock.
You can always look at the beta of a stock to get a sense of volatility.
Blaine, you were one of the main traders that I was under the impression stuck to low/mid-caps, so the fact that you don't pretty much clears up everthing I was worried about. I think I turn into a bit of a
hypochondriac when it comes to pulling the pieces together of all the different things there is to know about trading and makes me aware of all that I DON’T know because I know that those are the exact things that will sneak up and bite me, and/or chew my arm off. So, thanks for helping me confirm or deny those concerns guys.