How to play LOW FLOATS: via Hunt for Next 5-10 Bagger Ugotstocks/Mr. Bigz (original posting at 12.30 910AM)
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Hello everyone.
Just thought I would write a little blurb about how to trade stocks that have low floats.
First off, buy at the ASK. The seller at the ASK has a certain amount of shares to sell and until, or unless, those shares are bought the stock will not move up.
i.e. Joe retail investor bought shares and now wants to sell. He places a sell order at 0.04 to sell 40,000 shares. They sit there until his\her order is filled. If they sit there long enough without getting filled, there is a good chance this seller will lower his sell order price thus lowering the ASK.
You are buying a stock because you think it is going to go up, so hitting the ASK gives you the best chance of keeping the momentum going, and the ASK and share price moving up.
If people BID sit, the MM's see all those orders sitting there and will move the ASK down to fill them if there is not alot of action on the ASK, which can be the case in low floaters. This defeats the purpose of why you want to enter the stock in the first place. These BID sitters that want to buy in the stock are actually contributing to changing the upward momentum and potentially causing a retrace or reversal of trend.
With a low float, if a few people start selling on the BID, it starts to cause panic in other shareholders as they see the BID\ASK start to drop, so they start bid whacking as well, and we all know what happens then.
OK, so now let's assume you decided to buy into low floater and you have slapped the ASK and your order has now been filled.
Right away you should determine at what price or prices you want to sell or take profits based on whatever method you use, whether it be a certain percentage gain, a certain price value, and\or key resistance points on a chart.
Now is the time to place those sell orders. The reason is that one, you will be at the front of the line to get filled, since your sell order has been placed well in advance of everyone else, and two your orders will already be sitting there at the ASK when the price moves to this price level you have set your sell order, so you will be selling at the ASK and thus eliminating the need to BID whack.
If things do not work out as you had planned, or if you think you should change the price to a higher or lower amount, it is easy enough to go and change the sell price on your order and still get filled on the ASK.
