Day-Trading: Why is Float Important

Posted On: 23 Dec, 2017 07:24:28

The most explosive moves happen when a stocks has a low float and good news surrounding the stock. Things like a positive press release, advances in technology or good earning announcement are things that attract investors to a company. The combination of good news and a low float is what causes explosive moves or break outs.

To understand float you must understand what outstanding shares are. Outstanding shares are all the shares a company has, restricted shares + the float = outstanding shares. When u subtract restricted shares from the outstanding shares your left with the float.

Restricted are the shares that are not available for trading and are usually held by company executives and insiders.

The float are the shares that are currently available for purchase in the stock market through a broker. When the float is low the supply of available shares is low. When demand rises due to news and supply cannot meet demand it drives the stock price higher. This is how many day traders make money.

 

In the below, picture look at the Volume compared to the Shs Float and we can see that the volume almost equals the Shs Float. This is what we are looking for in a possible stock play.

float example

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