Financial Education

Different types of trades require different trading tactics. Some tactics include:

• Liquidity at any cost – need for execution outweighs market impact of trading large blocks
• Need trustworthy agent – large blocks of illiquid securities may require a time/price trade-off and the help of a discreet broker, who of course will require a higher commission
• Costs not important – the need for certain execution justifies paying the full spread, which is at least a competitive price
• Advertise to draw liquidity – for large trades with low information advantage, entering the order between the spread may draw counterparties. Or, it may draw front-runners who drive the price away
• Low cost whatever the liquidity – minimizing commission and trading costs outweighs the risk of failed execution

For more information, see all articles on: Active Management, Institutional Investing, Investing in Stocks, Portfolio Management, Trading Execution

See also:

Estimating Trading Costs Using Econometric Models

Equity Returns at the Turn of the Month

Algorithmic Trading Methods

Price Weighted Index

Limitations to Achieving Fully Efficient Markets