How to Avoid being Sub-Pennied
1)
Use active orders instead of passive orders.
Use active orders instead of passive orders.- Become a liquidity taker, especially on thick issues- If the spread is only 1 or 2 cents, PAY IT!- Passive orders get sub-pennied when they're right, filled when they're wrong.2)Break larger orders into smaller orders.
Break larger orders into smaller orders.- Instead of using 2000 share lots, try four - 500 share lots- Algorithmic programs have a tendency to sub-penny size, the smaller you are, the better chance you won't be sub-pennied.3)Avoid trading thinner issues.
Avoid trading thinner issues.- Sub-pennying is extremely prevalent in thin issues.- Almost impossible to trade stocks, that have an average spread greater than 10 cents4)When the spread tightens, don't be afraid to pay it.
When the spread tightens, don't be afraid to pay it.- If you trade thinner issues, and the spread tightens, you're better to take the offer or hit the bid.
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