Actually, if you are talking about thinly traded stocks, I would not suggest you to trade any of them.
Even if you are not using my methodology or my strategy. Even if you are using some other methodology or strategy, I would suggest you don’t trade thinly traded stocks. Why?
Because for thinly traded stocks, there is a typical characteristic you will see in thinly traded stocks.
Okay. When I said thinly traded stocks right, I am not saying that it is below a certain number of 10,000 shares traded on a daily basis is considered thinly.
When I said thinly traded stock, I want to focus on the average traded value because some shares, if you see that while one million or 10 million shares are being traded but if that share is only 10 cents or 5 cents on 1 cent, actually the average trading value is very low.
So I will want you to focus on the average traded value as a mean to gauge whether that stock is a thinly traded stock or not.
So for thinly traded stocks with very low average trading volume for example over the past 14 days past 13 days, on average only about ten thousand dollars being traded on a daily basis, that is extremely thin right because anyone can buy ten thousand dollars worth of shares and move the price very significantly. So those are thinly traded stocks.
For thinly traded stocks typically, if you look at the charts of thinly traded stocks with low average trading volume, you will realize that firstly there are many days where the price won’t move because it’s thinly traded. On some days, there might not even be any trading done.
Secondly, it usually wouldn’t have very clear trend lines for you to draw. You wouldn’t have very clear support horizontal resistances for you to know where are the key levels. So if that’s the case then why look at thinly traded stocks?
Another more important thing about thinly traded stocks is that even if you might be able to find in some thinly traded stocks with clear trend lines, clear support resistance levels but the thing is if you get into a thinly traded stock, it might be very difficult for you to get out when things go against you because it’s thinly traded right?
And when you want to get out, everyone wants to get out as well. Then you will get filled at a very very bad price.
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