2020 might disappoint those looking to capitalize on retailers, but we're confident the other holiday theme will stick.
Trading volume will be lower in the market today, and it's something to pay attention to for a couple key reasons.
Low volume means there are less buyers and sellers for your shares. It can be harder to get in and out of positions as there is less money circulating around.
To compensate for that, one thing that we can implement today is focus on names doing above average volume.
A sustainable directional move is more likely in a name trading good volume.
A simple Finviz scan for high trading volume can help us find these.
Alternatively, if we can identify where institutional trading is, it can be much easier to find stocks that can hand us large percentage gains.
It doesn't mean that we can't deliberately seek out stock with low trading volume though.
There are advantages to trading those just as there are disadvantages, but we have to be clear on what they are before we get involved in any position.
The disadvantage of trading low volume stocks is this: If you are looking to sell, for example, there will be less traders in the market available to buy back your position. This increases the likelihood of getting stuck in a trade and not being able to get out at the price you want.
The advantage of trading low volume stocks, provided that you exercise proper risk management and diligently researched your stock pick, is that you could be ahead of the curve and identify a multibagger, every trader's best case outcome.
All in all, volume matters. It's an essential factor we have to consider when trading, and we'll be considering it carefully in our trades today.
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