Identifying Liquid Stocks

I thoroughly enjoyed your cover story published in the latest issue. The story gave a meticulous overview of the high-growth opportunities in the Mid-Cap space. The narrative mentioned that mid-caps are almost always in a sweet spot owing to their liquidity relative to Small-Caps. Can you shed some light on how can an investor identify liquid stocks? - Shivanjali B 

Editor Responds: Thank you for your kind words of appreciation. Stock liquidity is a critical indicator of a stock’s tradability. Highly liquid stocks are easily accessible and can be swiftly converted to cash. As an investor, it is important to understand the liquidity of a stock before making an investment decision, especially should you have a shorter investment horizon. The following parameters can help identify a liquid stock: narrow bid-ask spread, high daily trade volumes and a high trade volume during a high float. Hope this helps. Keep writing to us!