Replies to post #8204 on China Growth Stocks

[CSykes]

Low float stocks act like that. One big buyer, or one big seller can completely impact the chart and thus the emotion of those who hold the stock.

Low floats usually have limited liquidity due to the unavailability of shares. When demand is high, low floats can move very quickly. The same is true when trying to sell too however. Because of the limited liquidity, very few "traders" take interest in a low float which translates into weak bid support. Once momentum slacks off in a low float you can expect a substantial pull back on very small volume.

Then you get the inexperienced trader/investor who buys a low float but doesn't understand these dynamics. The lack of volume and volatile nature of a low float causes inexperienced folks emotions to go up and down like a roller coaster. They tend to act like excited lemmings. They are either chasing the ask when demand is high, or chasing the bid down when there is no bid support.

Bottom line, you have to know what you are doing when you purchase a stock with a low float, take into consideration that lack of inexperienced people who may purcahse a low float, and above all.. have lots of patience.

I love low float stocks, because I know the nature of people who trade these penny stocks. Knowing the emotional actions of these individuals is the basis of how one formulates a strategy of trading a low floater.