The Problem With Illiquidity

<p>There’s a reason why we generally prefer highly liquid stocks, as opposed to less liquid stocks. With less liquid stocks, the <a href="https://www.tastytrade.com/shows/from-theory-to-practice/episodes/scenarios-impacting-the-bid-ask-spread-09-25-2017">bid-ask spread differentials</a> tend to be much wider, which works against us as we try to find the true market inside of this spread. Not to mention, wider markets tend to attract less activity, which reduces the number of counterparties that will compete for the other side of our order flow. Both of these things together can lead to significant problems getting filled on <a href="https://www.google.com/url?q=https://ontt.tv/30P9IL7&amp;source=gmail-imap&amp;ust=1640720313000000&amp;usg=AOvVaw2XkXSq-Jhblr0UEB-4WlDX">trade entry and trade exit</a>.</p>