How to Maintain Day Trading Liquidity

Think of your account as if it were a boat. Now think of liquidity as being a stream. When day trading, you need to make sure that your boat can always float easily and cleanly without being too large for the stream.

Liquidity is a measure of how easily one can buy and sell a position in the market, and it is a very fundamental element of trading, especially day trading. There are a few steps you can take in your day trading to make liquidity nothing but a small concern.

Where to Find Liquidity

Though volume and liquidity are not entirely related, liquidity is still most often found in markets with the highest volume. High volume means there is significant investment and speculative interest in a market, and that at any time, you’ll be able to buy in and out of positions. Also, high volume stocks, bonds, exchange-traded funds or currencies will also frequently have the greatest number of market makers who match buyers and sellers and ensure the market flows easily.

In the realm of day trading and stock trading, exchange-traded funds generally offer the most liquidity to investors. Since an exchange-traded fund is usually a combination of stocks or commodities bundled together and sold in a package, investment banks and algorithmic trading computers help keep the price of exchange-traded funds in line with their underlying products. In doing so, hundreds of thousands of shares are bought and sold, adding to the number of buyers and sellers, and ultimately, day trading liquidity.

The popular SPY ETF, made to track the performance of the S&P500, generates daily volume of nearly 200 million shares. In an eight hour trading day, that means that 25 million shares are traded per hour. This is 416,000 shares per minute or nearly 7,000 shares per second! Finding day trading liquidity here should be done quite easily.

Be advised, however. There are some low volume and low liquidity exchange-traded funds; however, since these are often unprofitable for fund issuers, there are only a few on the market at any one time. Most illiquid day trading ETFs are of the currency tracking variety.

Blue Chips

Blue chip stocks are secondary for stock trading liquidity. Popular names are a haven for day trading professionals, and they attract investment banks and other institutions that trade millions of shares per day. Often, day trading professionals will pick a few stocks and trade them exclusively, and most often these shares are that of blue chip companies like Microsoft or General Electric.


The currency markets often have the best liquidity, as up to $3 trillion in currencies trade hands on any one day. Plus, since the currency markets attract worldwide interest, there are far more market actors and investors to buy and sell amongst each other. Stocks, in contrast, usually attract mostly domestic interest.

Most traders should be able to find liquidity in the names and financial products they want to trade the most. With the invention of at home and online trading, more traders have been brought into the markets, and absent little known small caps, most financial products attract enough interest to stay liquid.

Al Hill Administrator
Co-Founder Tradingsim
Al Hill is one of the co-founders of Tradingsim. He has over 18 years of day trading experience in both the U.S. and Nikkei markets. On a daily basis Al applies his deep skills in systems integration and design strategy to develop features to help retail traders become profitable. When Al is not working on Tradingsim, he can be found spending time with family and friends.
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