Low Float explenation...derived by differant acumulated posters
Stocks which have a float of under 10 million shares are considered to be low float
How to find low float stock breakouts
C >= 1.04 * C1 AND V >= 1000 AND V > V1 (4% breakout scan pcf.)
public float
DefinitionThe portion of a company's outstanding shares that is in the hands of public investors, as opposed to company officers, directors, or controlling-interest investors.
Low float stocks is when a company’s float is small, say ten to twenty percent, which means there isn’t a big supply available for the public to buy and trade
The best way to play low float stocks is to keep alerts set on your trading platform. You can keep a list of where the bottom is and let the stock accumulate. Traders can buy the low float before it has a chance to run up Watch for volume to come in and as the stock has run you cans sell into the buyers
Float is not a synonym for volume. Float refers to the amount of stock available for trading. The float consists of stock that is not owned by officers, directors, the founding family, a family trust, or controlled in some other way by insiders. For further info, see below.
Stocks that have a small percentage of their shares available for the public
Stocks that can't even trade $20k a day are deathtraps, and really I prefer > $100k to feel good about them but I could sometimes skim less
13 week average daily volume), last price $5.25 = $4,672 worth of stock trades in an average day.
For GTIM it's the $4,672 number that I care about, I prefer this number to be over $100k, but I can accept $20k if I am looking to do only a small trade.
There's several points about volume, and it's actually about dollar volume not share volume in both cases. The difference really sticks out in pinksheets, especially in subpenny or similarly low priced stocks, but you'd almost never notice it in bigboard stocks because they tend to have higher prices in general. It does happen to a few off radar stocks in bigboards too though. In pinksheets you can find a stock worth .001, where 1 million shares is only $1000. You won't find stocks like that on big boards, and it's not a good stock to be trading even though it trades a million shares a day.
Point 1) The main reason I look at volume is to figure out how much is safe to trade in a stock.
If you try to sell more than the average volume you'll find that it's really hard to do without destroying the stock price. In some cases you'll find you'll have to sell it in chunks spread across multiple days or weeks to avoid losing everything, even then you're going to pay multiple commissions trying to unload which will make you unhappy.
As a rule of thumb, I try not to trade more than 25% of the average daily trading volume unless I want to gamble losing my possibility of profit. Sometimes you can do 50% but that's quite risky and I would only try it on a high volume stock.
The act of selling half the trading volume of a stock in a block will _cause_ the price to drop before you manage to sell and you won't get what you should.
Point 2) Stock charts and such in low volume become meaningless, but so does fundamental analysis. Your filters seemed to be focussing on fundamentals of companies which is why I thought this would also be important. It's the kind of analysis which would have much better results on normal trading stocks.
When you have stocks with extremely low trading volumes, and their charts look choppy or detached with lots of gaps, trading these stocks is not about fundamentals. It's a reallly risky type of trading which focusses on trading "broken market mechanics" and has little to do with the stock or company. The only real way to win that kind of game is trying to trade very tiny trades (like $100), waiting long periods and being patient trying to sell that whole time for your price, and hoping to take advantage of broken mechanics to get a profit. In some cases it can be a high percentage, but you're making $100 at best for a lot of work and risk and really it's only a few rare traders that will generally do it.
If you're not trying to trade broken mechanics, or if you're interested in trading more than $1000, it's best to avoid those stocks. This is also why these stocks have a hard time gaining normal trade volume for years, because most investors avoid them like the plague.
Remember also, all it takes is one ex-employee with $20,000 of stock to sell in a market order to destroy the stock price. It's really vulnerable to surprise trades.
Point 3) It's important to note that averages are exactly that. When you are really wanting to sell or buy you'll find it can drop to 10% of the average volume and really make life hard for you. Similarly when you're desperate to sell it can balloon and crush the price before you can get out.
So to go back to GTIM. The average dollar volume is $4672, so i'd say it's risky to trade more than about $1100 of this stock. On the surface it looks like you'd be waiting an average of 1-3 months to make about $160, of which you'd lose about $60 when you tried to sell it. If I look at the intraday chart, buying or selling 100 shares can push the stock price up or down by .35. So if it's sitting at $6 and you try to sell 100 shares (about $600 worth) you might really get around $5.65 because selling that much appears to drop the price around that. You can cause yourself to lose about 6% just from the act of trying to sell $600 worth on a slightly below average day.
Summary) There's a difference between low float stocks, and stocks with broken mechanics. Most people that say low float stocks, mean stocks that will move quickly when they go (in either direction). Broken mechanics stocks are a whole different thing. It's possible to find low float stocks that have reasonable daily trading volumes and they're much more healthy to trade.
At first review I 'd say that I'm mostly referring to what you describe as broken mechanics. Although the float is a contributing factor. Particularly when there is buying pressure, I'm contemplating.
My thought here is based on the premise that a company with solid fundamentals, operating on at least a sustainable revenue, with a low float, rarely, if ever, has bad press releases or dilution. Worth noting here is that these types of companies are in relatively boring sectors - e.g., restaurants, logistics, widget manufacturing, etc.
As a result, if we find a place that has historically shown support, then, ideally, it will eventually go up. Particularly if they continue to increase revenue / profit, it becomes a take-over candidate, it has a little buzz once every now and then - like in anticipation of a certain quarterly report every year (cyclical), etc. (A high amount of insider ownership can help to increase confidence in finding this support as it keeps the market makers in check. i.e., such a company as that mentioned tends to have a common employee option exercise price.)
How to find low float stock breakouts
C >= 1.04 * C1 AND V >= 1000 AND V > V1 (4% breakout scan pcf.)
c c
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