I’ve been following a NASDAQ stock which is behaving strangely-it regularly moves up and down as much as 20% a wekk…and it has a trading volume of around 20,000 shares per day.
Is this supsicious? Should I stay away from such a stock?
What do you think?
If you want to correctly predict the stock market, the trick is to do it often. You’ll be right sometimes.
It’s human nature to believe “I” am Nostradamus and others are not. If you can predict accurately, why do you believe many others can not? If many others can, of course the market already reflects those predictions.
That’s a pretty large change, but one would need more information. 20K shares traded per day is practically nothing if the company has 100M shares outstanding, but quite a lot if it has 1M. Likewise, a 20% change is a lot more worrisome in a $50 stock than in a $1.50 stock.
“High velocity” stocks are often goldmines for those who make a living trading them. I.e. people who specifically look for this sort of behavior and have systems (and capitalization) to handle it.
Even if you’re not, there are methods that could be employed to make this reasonably safe for you - assuming you’re willing to lose big if you’re wrong.
Since you’re asking the question, I assume that you’re not used to trading choppy markets. I wouldn’t recommend trading a type of market that you’re not used to.
The market experienced a boom in the 90s because tech stocks were undervested. There was a capacity for growth the far exceeded the capital laid in. That’s no longer the case. You can still make money long term, and a really good broker can still game the system. But for the meantime, you aren’t going to see explosive growth except in isolated stocks. Spread your money around and keep an eye on the papers. Remember, if you just converted your money to Euros a few years back, you’d probably be far ahead of market investors now. If you watched stock market analysts you wouldn’t have seen that coming, if you researched a broad range of markets you would.
hi volatility and low volume implies a spivvy market or stock. Watch your fingers 'cause you can get burned real bad. i’ll take high volume to show the health of a stock or a market any day of the week. Trying to extropolate what the “market” thinks about a low volume stock is a poor indicator.
I try not to touch anything with volume of less than 1 million per day (with a price that at least approximates a minimum of $10).
Unfortunately, I frequently violate that rule, to my rue. Suckers almost always manage to, well, make a sucker out of me.