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THE MARKET WHISPERER 19 3

leap, or even much higher. Stocks with increased volume can be easily
found using simple screening software or while glancing at the stock’s
chart. We can easily discern the growth in volume if we compare the charts
showing the prior and current day’s volumes. Of course, a comparison is
only possible after at least midway through the current trading day, and
must be made for the same timeframe of the previous day. When I consider
buying a stock and see a relatively noticeable growth in volume, I can make
the decision more easily. I may even increase the quantity of my purchase,
based on the premise that the increased volume indicates increased
interest and therefore increased chances of success.

2. The Possibility of Buying and Selling at Any Time

Traders will buy a stock only if they are certain that they can buy and sell

at any time, at any price, and for the entire quantity purchased. When the
average daily volume of trade is low, for example only 100,000 shares per
day, the spread between the bid (buyers) and ask (sellers) will usually be

more than one cent. This makes it difficult for you to buy and sell at your
desired price. For example: you bought a stock and wish to sell immediately,
but find that you’re forced to sell at a considerable loss because the closest

buyer is too far beneath your buy price.
Furthermore, stocks with low volumes carry no “meat,” and their buy

and sell liquidity at any price, even if buyers do exist, will be relatively
small. Because of the large spread between bid and ask, and the absence
of “meat,” just one large transaction is enough to strongly impact the stock
price. It could suddenly go up, which is great if you bought it. By the same
token, it could suddenly drop, leaving you no time to sell with minimal

loss. In short, light volume stocks are not for the fainthearted or those who

hate high risk, like me.

SMART With time, you will recognize most of the stocks you are
MONEY trading and will not need to check whether they match
volume requirements. You will get to a point where those
checks are needed only for a small range of stocks.

Conclusion

A professional day trader will usually not trade stocks with an average
volume of less than one million shares per day. Not to worry: there are
thousands of stocks with a day volume in excess of that figure.