In the moment, for a share X, to trade I use the price, volume, \$ volume, # trades, % chg and the bid-ask spread (BAS). To make day trading on the OTC market, it is quite easy to judge humanly what differentiates a good from a bad BAS. However, it is not so easy to program it. How can we describe a good from a bad BAS mathematically?

As far as I'm concerned, if the BAS is large enough, then it is good to do scalping strategy and if it is small enough, then it is good for standard day trading. How could we define 'large enough' and 'small enough' mathematically? Any help?

I give you an example :

``````Share    bidPrice   bidSize   askPrice  askSize
1     0.0004     4499998   0.001     11203000
2     1.86       875       1.88        1200
``````

Do you understand that even if 1.88 - 1.86 = 0.02 > 0.001-0.0004 = 0.0006, I prefer to buy 1000\$ of the second action than the first one? The probability that the BAS(action 1) becomes small enough is lower than the BAS(action 2) becomes small enough.

BAS, askSize, bidSize, and volatility are probably variables to consider.

• while an interesting question, I don't think really specific trading mathematics is for this site ? Do you know about quant.stackexchange.com – Fattie Feb 27 '18 at 14:22