The volume of the amount of shares traded has a profound effect on all penny stocks.
The difference in penny stocks and large stocks is that pennies are more susceptible to volume than larger stocks.
But this can be used to your advantage.
Adding the volume of each of the last 30 trading days together and then dividing the result by 30 computes the average volume of a stock.
You can compute the average volume on an annual basis or any period you want in the same manner.
The average volume is very important for penny stock investors.
Large volume consisting of selling will drive the price down while large volume consisting of buying will cause the price to increase.
Investors will take notice when there is an increase in volume and react according to the direction of the price.
Like investors in larger companies, penny stock investors are prone to following the flock.
When they see a great deal of volume they may suspect that a dramatic event has taken place or getting ready to take place.
If they see selling, they assume that there was a negative event even before checking out what the event might have been.
Large volume attracts investors like bees to honey.
They gather around and try to decide if people are getting in or out.
If they see that investors are rushing into a stock, they may assume that something good is going to happen and they join up by buying the stock.
You can take advantage of the herd mentality by predicting the large volume.
How so? By looking at the average volume of a stock compared to its current volume.
There may be a pattern occurring.
If you notice that the volume has been higher for the last 10 days (or so) than it has been for the last 30 days, and the price is slowly increasing, than that means investors are accumulating the stock.
As one of your indicators to help find the best and hot penny stocks, keep track of the volume as part of your due diligence to buy or sell.
The difference in penny stocks and large stocks is that pennies are more susceptible to volume than larger stocks.
But this can be used to your advantage.
Adding the volume of each of the last 30 trading days together and then dividing the result by 30 computes the average volume of a stock.
You can compute the average volume on an annual basis or any period you want in the same manner.
The average volume is very important for penny stock investors.
Large volume consisting of selling will drive the price down while large volume consisting of buying will cause the price to increase.
Investors will take notice when there is an increase in volume and react according to the direction of the price.
Like investors in larger companies, penny stock investors are prone to following the flock.
When they see a great deal of volume they may suspect that a dramatic event has taken place or getting ready to take place.
If they see selling, they assume that there was a negative event even before checking out what the event might have been.
Large volume attracts investors like bees to honey.
They gather around and try to decide if people are getting in or out.
If they see that investors are rushing into a stock, they may assume that something good is going to happen and they join up by buying the stock.
You can take advantage of the herd mentality by predicting the large volume.
How so? By looking at the average volume of a stock compared to its current volume.
There may be a pattern occurring.
If you notice that the volume has been higher for the last 10 days (or so) than it has been for the last 30 days, and the price is slowly increasing, than that means investors are accumulating the stock.
As one of your indicators to help find the best and hot penny stocks, keep track of the volume as part of your due diligence to buy or sell.