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What is high trading volume in a stock indicative of?

Can someone explain bid size, ask size, and volume, when it comes to stock trading?

  • I am watching this penny stock, that is currently 0.151/share....the bid size is 0.15/10,000, and the ask size is 0.1515/5,000. The volume is 24,195,049. Suppose I have $10,000.....since it's 0.15 per share, I could buy 66,666 shares....but since the ask size is only 5000, does that mean I can't buy it all at once?

  • Answer:

    A bid of 0.15x10000 means that someone wants to buy 10000 shares for $0.15. There are probably other bids in the system, but only the highest is listed. An ask of 0.1515x5000 means that someone wants to sell 5,000 shares for $0.1515. There are probably more asks in the system, but only the lowest is shown. Volume is just the number of shares traded -- usually it is per day. It is good to compare that number to the number of shares you want to trade to get an idea of how liquid the market is and how likely you are to make a trade at the price you want when you want. In your case, you want to trade about 0.25% of the volume for the day. That's a little high, but not at all unusual for penny stocks. If you want to buy 66,666 shares at $0.15 and the ask is 0.15x5000, then you will get the 5,000 shares but you will have to wait for someone else to sell you more at that price. You can request an all-or-none trade, and then you would only buy the shares when there are 66,666 available to buy all at once (which may never happen).

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It's how many shares at the ask or bid at the given price. If you enter a market order, you'll get the first 5,000 at .1515 (assuming that ask is still there when your order hits, and you aren't beat to it by someone else), but you don't know the size and price of any other ask available. You need to enter a limit order, for all you know the next ask is 20,000 @ .20. In penny stocks this happens a lot, they're waiting for some noob to come along and enter a market order. Always use a limit order, unless you're dealing in something with a mammoth market cap.

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