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Author Topic: General Stock Questions  (Read 3509 times)

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June 22, 2009, 12:45:12 PM
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BrassBalls


Hi Everyone,

I have some general questions about stock trading and how things work in general, I hope this is the right place to post this. I'm quite new to all of this and while I'm learning a ton from this site about TA and the intricacies of trading, some of the higher-level stuff is still hazy.

1) What does it mean when a stock shows no volume, no open price and no trading happening on a business day?

2) How much is too much on really cheap penny stocks? Say price is .0005 per share, aside from losing money, what would be the negatives to buying say, 10 million shares. Would volume like that incite a "pump and dump" response from the market on that particular stock based on high buy pressure?


Thanks in advance!


-Mike

June 23, 2009, 01:45:50 AM
Reply #1
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ShyTrader


Hi Everyone,

I have some general questions about stock trading and how things work in general, I hope this is the right place to post this. I'm quite new to all of this and while I'm learning a ton from this site about TA and the intricacies of trading, some of the higher-level stuff is still hazy.

1) What does it mean when a stock shows no volume, no open price and no trading happening on a business day?

2) How much is too much on really cheap penny stocks? Say price is .0005 per share, aside from losing money, what would be the negatives to buying say, 10 million shares. Would volume like that incite a "pump and dump" response from the market on that particular stock based on high buy pressure?


Thanks in advance!


-Mike


I'm not a guru at this, I'm also newer (about a year), I'll just tackle #1.
It could mean:
A) You or your broker has a problem with that symbol
B) If it was early in the day (close to open) it is possible nothing has traded yet, or that stock was slow to open.
C) If you see zero bids/asks, it is possible the market was closed. This happens some times.
D) You could have caught something really odd (new stock, a bug, etc). Check it again a little later, and see if you find the same thing.

Hope that helps. Another comment about volume:
The lower the volume, the lower the interest in people like you and me trading the stock. This means it's harder to sell your stock once you get it. Many regular trader will tell you do not trade a stock that has less than 1 million shares per day volume. Note: Google, has 4 million a day (@$400 a share, THAT'S a LOT of CASH!) So I look at it like as if the big guys want their $50 stocks to have at least 1 million shares per day, the penny stocks should be the same. One might even expect greater volume since the price is so cheap.


The strange thing about trading, is there is no real science. Yes there are trends, personal rules, patterns, etc, but there are so many things that manipulate those trends/patterns (like news, politics), and the way people research stocks, that for your question #2, it's really more of a personal preference and personal comfort.


As being really new, let me make 2 suggestions.
#1. Be patient. Then be more patient, then be more patient.
  (Most people IMO lose money because they get in, watch the stock go down, and sell. This can be made worse if you buy to high, then sell low.)
#2. ration your money. If you are considering a 10 million share purchase, than you have enough money to divider you cash into at least 10 even portions. Always hold some cash back for emergencies (my stock dropped, and you want to double down to lower your average cost) or you find a killer purchase that you know will earn you at least a 300% return (so you can actually lose your money... Murphy goes to play on these)... but I think you get the point.  Always plan to have some cash, you never know when you will want it.

July 16, 2009, 06:51:06 PM
Reply #2
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Chipldr999


I am not at Daytrader Status with more than $25,000 in my account (hopefully within a month or so I will be).  How likely am I going to get flagged for doing  4 or more daytrades in a week?  I did it once before not knowing it, and never had a problem.  I also assuming some of you do it on a regular basis??

Is it my Broker that will be the first to know?  I figured it would block me from doing it.   Thanks for your input!

July 17, 2009, 02:30:34 AM
Reply #3
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Trelly


Hi Everyone,

I have some general questions about stock trading and how things work in general, I hope this is the right place to post this. I'm quite new to all of this and while I'm learning a ton from this site about TA and the intricacies of trading, some of the higher-level stuff is still hazy.

1) What does it mean when a stock shows no volume, no open price and no trading happening on a business day?
In penny stocks, it means no one is trading it and there is no market maker in the stock. Generally you want to look for a daily average volume of $50 000 or more, otherwise it's illiquid and you will be guaranteed to lose money


2) How much is too much on really cheap penny stocks? Say price is .0005 per share, aside from losing money, what would be the negatives to buying say, 10 million shares. Would volume like that incite a "pump and dump" response from the market on that particular stock based on high buy pressure?
No generally not if there are a high amount of shares being traded. As a rule of thumb, I wouldn't buy over 10% of the daily volume as market makers play tricky games sometimes where they create the illusion of volume by trading with each other. If you youtube pump and dump there are some good videos illustrating the telltale signs. Always check if your stock is being promoted and for how many shares as well as buyins.net to make sure you're stock isn't being naked shorted. Also be aware of dilution frequency as many of these stocks simply issue more shares into a death spiral.

You shouldn't have to worry about pattern day trade rule. It's pretty difficult to buy sell and buy again unless it's one heck of a volatile stock. I keep a base half of that for trading and have never had to worry about the rule unless I'm playing with the over $5 crowd




Thanks in advance!


-Mike
Best of luck , Mike