Low Volume Stocks

Low volume stocks can make it much more difficult to trade, or at least trade profitable. They can make it harder to enter or exit a stock as well as use volume as an indicator.

Every time you place a trade volume should be that little indicator in the back of your mind. You want to make sure the stock has a good amount of volume before you enter it.

What is volume exactly? It tells you how much of a given stock was traded during a time frame. Every number counts as 2 trade’s one buy and one sell. So if volume is 15 million for the day it means 15 million people bought and 15 million people sold that day.

It is very important to look at volume because if it is too low it could pose problems for you as a trader.

The first problem low volume stocks give you involves getting in and out of a trade. If there are only 40,000 trades on a given day you might find it very hard to get in or if you do, you might not get in at the price you want.

The second problem is similar to the first. If a stock turns against you it could be hard to get out fast enough. Falling price on a low volume stock could make a crowd of sellers with no one around to buy. By the time you get out you could have a loss so far under your original stop that, you would be hurting pretty badly.

The last way low volume stocks work against you is the mere fact that you can’t use the volume to help you. Normally volume works as an indicator to determine the strength of a price action. High volume on an up day means there is a lot of force backing that upday.

If no one is trading the stock anyway it makes it harder to tell where the high volume and low volume days are.

So what is good volume? Every trader has a different opinion. It is really based on your account size. The more shares you are going to buy the mare volume you need to help you get in and out easily.

I believe you should be able to find a stock that is trading at least 1 million shares per day. That should allow you to move in and out pretty freely.

As your account gets bigger however you may want to move the bar up. Only trade stocks with more and more volume. Just remember to keep volume in mind the next time you make a stock trade.