If you work in the stock market, then chances are you have heard of low float stocks at some point.
A stock’s float refers to the number of shares available for purchase, which can be lower than the number of outstanding shares. Because of this, low float stocks (see also ‘What Is Float In Stocks?‘) are known for their volatile nature, which creates opportunities for investors and traders.
However, low float stocks are also considered unpredictable, as their lack of available shares could impact the price should it fall.
In this article, we will teach you how to find low float stocks while taking a detailed look at how you can use them to your advantage.
What Are Low Float Stocks?
A low float stock can be defined as a stock with a small number of outstanding shares, which means the shares are not owned and have yet to be claimed.
One of the more common ways to find a stock’s float is to take the total number of shares and subtract it from the number of shares already purchased by insiders.
While this may sound like a complicated formula, there are various tools that you can use to calculate the data.
In most cases, low float stocks (see also our article on Advisory Shares) are companies owned by company directors and employees, which leaves a small number of shares available for retail investors and traders.
Because of this, most low float stocks will have around 10-20 million outstanding shares, which adds to their unpredictable nature.
When investing in stocks, it is important to determine whether the stock has a low float, as most low float stocks are known to have increased spreads and volatility.
This is because there is a larger demand and limited supplies.
For this reason, low float stocks will often fluctuate in price, which increases their volatility and makes them a favorable asset among traders. Because of this, traders who invest in low float stocks will often gain more leverage due to number fluctuations.
However, this does not mean that low float stocks are stable, as knowing when to pass the stocks on is also extremely important.
Because of their unique reputation, low float stocks are often ideal for day traders. However, they should be avoided by long-term investors.
Why Trade Low Float Stocks?
As mentioned above, low float stocks can be attractive to traders because of their volatile nature, which makes them a valuable asset in certain markets. Low float stocks also come with a small trade, which can impact the final share price.
For example, if an investor was able to sell 1 million shares in a company, it would have little impact on the stock price if the company had a float of 30 million shares.
However, if an investor was able to sell 1 million shares out of 10 million, then it would have a more profound effect on the stock price.
The volatile nature of low float stocks can result in frequent price increases, which can create profit opportunities for more experienced traders.
What’s The Difference Between Float & Outstanding Shares?
In basic terms, float and outstanding shares are methods used to measure the shares of a stock.
Floating stock is measured by taking the total number of outstanding shares and subtracting it from the number of closely-held shares.
The latter shares are those held by insiders and investors who work for the company, such as the director and employees. This formula shows the total number of shares available on the stock market.
Outstanding shares are determined by the total number of shares issued, which includes those that are still held by the shareholders.
How To Find Low Float Stocks
Once you become aware of low float stocks (see also ‘What Does Low Float Stock Mean?‘), you can start searching for them, as low float stocks are available on a variety of platforms:
How To Find Low Float Stocks On Scanz
One of the easiest ways to find low float stocks is on Scanz, which uses a pro scanner to determine the best stock available.
In contrast to other search tools, this platform features a float parameter, which can be used to detect stocks with less than 20 million shares.
When you have determined all the low float stocks available, you can use additional parameters to search for low float stocks that are primed for trading.
How To Find Low Float Stocks On Benzinga Pro
When searching for low float stocks, it is also possible to use screener tools such as Benzinga Pro, which also comes with various filters and parameters to determine the best low float stocks on the market.
With this platform, you can specify the stock’s dollar amount, float, float percentage, volume, outstanding shares, and much more.
There is even an option that allows you to save the parameters you have chosen, which can make them more accessible the next time you are trading.
How To Find Low Float Stocks On TradeIdeas
TradeIdeas is another tool that can be used to find low float stocks on the market, as it uses scanning technology to locate and trade the stocks.
However, the tool does not feature a ready-made scanner, which means you will need to adjust the parameters until it reveals the stocks with the most potential. In order to do this, you will need to filter the stock by volume, gap percentage, and float.
By using this method, you should be able to narrow down the list to low float stocks that offer the most notable price moves.
Final Thoughts
Low float stocks are stocks with a low number of shares, which makes them a valuable asset among experienced traders and investors.
Because of their volatile nature, low float stocks are often in high demand, as they offer notable price changes that could turn quite a profit.
However, finding these stocks can be a complicated process, which is why many investors use platforms and scanners to filter out the best options.
In most cases, news and volumes are strong indicators of stock success, so it is important to be mindful of these components when searching for low float stocks.
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