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Pastimes : How to best deal with KOOKS at this web site
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To: Gottfried who wrote (1762)11/14/1998 12:08:00 AM
From: Iceberg  Read Replies (1) of 1894
 
>I buy 1 share of ABC at $100. It goes up $1. I made a buck.
I buy 2 shares of DEF at $50. The stock goes up $0.50. I made
a buck. Etc. Each time I invested $100. Each time I made $1.

Gottfried,

Exactly. The key element is how many dollars you invest, not the price of the stock.

Cooper seems to be saying that a percentage move is easier for a high-dollar stock to make than for a low-dollar stock to make. He didn't say anything about volatility in describing his preference for high-dollar stocks. Nor did he say anything about the dollar amout invested. Price, and some apparent confusion about percentage moves, were his only criteria for selecting high-priced stocks to trade.

I don't know that volatility and stock price are necessarily related. As you suggested, are high-dollar stocks inherently more volatile than low-dollar stocks? I don't have any reason to think they are. But I don't have any reason to think they aren't either. I assume that high-dollar stocks can be every bit as volatile, or not as volatile, as low-dollar stocks. But I don't know. It would be an interesting study.

What I surmise is that Cooper might have confused absolute price movement with volatility. He may be right, for all I know, that high-priced stocks are more useful for trading purposes than low-priced stocks. But if so, his explanation as to why left a lot to be desired. If high-priced stocks are more appropriate for trading purposes, IMO it must be for reasons other than price alone.

Ice
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