Is there any parameter which directly corresponds to liquidity of a stock?

General
1

Daily volumes vary and so cannot signify liquidity exactly.

Is there any parameter which can be directly associated with liquidity of a stock.

2

I consider any stock which has volume above its 21dayMA, continuously for the previous 5 days, as having considerable liquidity for the current day from trading point of view.

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3

The 'Impact Cost' is a measure of liquidity. NSE has explained it quite well. 

4

Oh thanks for that.

5

Im not an expert. But as per varsity, the spread between the bid and ask gives you an idea about liquidity. Hope it helps… :slight_smile:

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6

Thanks Jagadeesh, yes I understand that.
Even if bid ask spread is closer, say stock BHARATFORG, the bid ask spread of this stock of CMP 920 is around 1 point or less. But quanities are always less than 100, say 10, 15 etc. So when someone places a order for 1000 shares or something, the price slips more than 5-10 points.
As per me, eventhough bid-ask spread is less, such stocks which have low trading volumes are not very liquid. May be I would say 60% liquid.
This is what I am trying to identify, how to compare liquidity between one stock to another.
If you take reliance which is CMP of 910, the bid-ask spread is again close to 1 point, but huge orders will easily get through with almost no slippage, because volume at each price point is good.
So I cannot consider bid-ask spread as sole criteria for liquidity. Hope you abide to what I say!

7

Yes Aastro. I think i got your point. In that same post only, he mentioned that the the average daily volume must be greater than 50,000. I personally like to trade those stocks whose 20day average daily volume is greater thatn 1million with low bid ask spread.

8

Yeah read that. But not very helpful.
I just need to know whether a stock is liquid or not. How to do that.
Like taking some back data and calculating something to know whether stock XYZ is liquid or not, if so by what standard?
Thanks for your help, Karthik.

9

Another option is do define your own liquidity parameter. I used to do this long back…for instance I knew every time I traded Nifty Futures I’d trade at the most ‘X’ lots. So I’d check how many contracts (as a multiple of X) were traded every 10 minutes. If the answer was over 5 times X, I’d safely assume the contract is liquid enough for me.

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10

Thanks Karthik, I will do something like that.