Yesterday I nailed a dividend capture call and still lost money on it. Right direction, right signal, the recovery happened (I could see the candle above my entry price for 30 min, not once, but 2 times!), but my TP order didn't trigger, had to exit with negative P&L anyway. Took me a bit to figure out why, and is something I will never forget now. So I would like to share it with the community.
What happened to me yesterday is something called **liquidity**.
The candle chart shows the last price a share traded at. Your limit order fills against the bid and ask, not against the last price, which on a stock with low liquidity can be way far from that. So the price hits your target, but you don't get filled (someone else does), and you sit there watching it. The prediction was fine. The stock just had not enough people willing to pay that amount.
And another common misunderstanding highly related to this: liquidity is not volume only, is **dollar x volume**. The stock I landed on yesterday (and yes, i will call you by your name, AMEX:SACH) had near 1 million 30 day average volume. Which is not a bad number on its own. But, it was a $1 stock, that means it was moving just $1 million every day. In the stock market that is nothing. That is what generates flat, thin candle bars on tradingview.
The rule I use now: skip anything under $25 million average daily dollar x volume, ideally stay above $50 million. If is right at the edge, just quickly doublecheck with my own eyes the candles to confirm I can exit the position at my price (as long as it recovers, of course).
Happy dividend capture!