Trading Low Volume Stocks

[cpatte7372]

Hello,

I would just like to get your comments/suggestions on trading low volume stocks.

I understand that the general consensus is to stay aware from trading stocks with low volume, however I am investigating a system that generally involves trading low volume stocks.

The system is as follows:

I scan for stocks on MSN Screener for those stocks are near their 52 Week low but are exhibiting postive price momentum. MSN states it as "The price of this company has been within 10% of its 52-week low with a positive price momentum. This is usually considered to be a bullish indicator since it means that bargain hunters are buying it and pushing the price back up."

Now, typically, these stocks are low on volume, indeed five one of the stocks found had an average daily volume above 100K. Most were below 50K, some even lower than 10k.

So, I would like to hear from those that would trade these stocks, given that they are exhibiting strong uptrending price momentum although their volume kinda stinks.

As always, I really appreciate your comments.

Cheers

Carlton

[Gavishti]

Personally, I would not mess with low volume stocks unless I could afford to hire a research staff to figure out which ones were really well run companies with a bright future. Or I was a financial analyst guru. It is my observation that technical analysis breaks down on low volume stocks and becomes unreliable. In addition, there is generally increased slippage with low volume stocks, commodities, options, etc. Not a place for a novice.

[cpatte7372]

Gavishti,

Thanks for your insights, mate. I wonder if this the general view of traders!



Cheers

Carlton

[FibbGann]

Cpatte,

Don't mess with low volume stocks until you become an avid and very successful trader! IMHO

Fibbgann

[cpatte7372]

I hear yer mate.

Cheers

Carlton

[soylent]

I'm w/ Gavishti...

If you're in it for a 'swing' type trade, I wouldn't go for the low volume stuff.

But, if you are an investor, it doesn't really matter.

NOTE: To me, low volume is < 3Million shares a day. Though, many good stocks are in the 1-3Mil range.

I do like to 'invest' (3+ month hold times) in stocks < 100K/day range. But, only if it's an 'IBD' kind of stock (strong earnings, undiscovered, quality mutual funds aquiring, above 50/100/200, etc)...

-c

[cpatte7372]

soylent,

Thats very interesting. I would be very interested to hear what others consider low volume, uhmmmmm.....


Cheers


Carlton

[DuaneG]

I rarely get involved with low volume stocks, but on occasion, I'll venture to take a position should the risk/reward work out to be potentially profitable. As a general rule, I don't like holding more than 1% of the daily volume as you can unintentionally become a market maker. This in turn makes getting out of the trade without affecting the price a task in itself.