Okay, so you have $10,000. 100,000 daily average trader value for most stock is pretty fine. So actually most stock should meet your liquidity if you only have $10,000 as your total equity. However, if let’s say you are generally quite a fluid, you are a high-net-worth individual, if let’s say you have $1 million of equity in your trading account, and that is what you are trading, which means that your total equity is about $1 million, which means that your average trader value, daily trader value of any stocks that you look at to trade, should have 10 times, which means that $10 million, average daily trader value.
You realize that the number of stocks that meet your criteria, in terms of this liquidity, is going to be much smaller pool, right? And that is also one of the reasons why generally the concession and understanding is that the more money you have, the lesser pool of stocks or instruments that you have available to trade. Okay. So that is the reality of life. So when you are very rich, it doesn’t means that everything is good. It means that you have less options to choose from. Alright.
And that’s the reason why, when people who have big trading account or especially those fund managers, hedge fund managers, where they are managing $10 million, $100 million, and they have to spread their positions throughout, right? And they usually focuses on all those macro instruments, which has very, very deep liquidity compared to those small, cheap, or low price growth stocks. They can’t, because their capital is too much for that liquidity.
Now I want to talk about that 10 times thing. So don’t get so hung up on whether it’s exactly 10 times more or not. 10 times is just my suggested guideline, okay. If it’s more than 10 times your total equity, usually it’s definitely more than liquid enough. It doesn’t means that if it’s nine times, then you definitely cannot trade this particular stock, alright. Again, it’s the context I want you to understand. Right? So 10 times is just a guideline.
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