Active penny stocks are stocks that have liquidity, meaning there are people buying and selling the stock. Unlike blue-chip stocks with millions of shares change hands each day, many penny stocks don't have any buyers or sellers. The active penny stocks list only stocks that have high volume.
Why is Volume Important?
When there is no volume or low volume for a penny stock, it is very dangerous to trade the stock. When you want to buy a stock, you may not be able to find a seller to sell you the shares at the price you want. Likewise, when you want to sell a stock, you may not find someone to buy your shares.
Many times, you may have to force yourself to cut a position at a loss because of the low liquidity of a stock. Therefore, you want to stay away from stocks with very low volume.
How to Use The Volume Indicator?
The volume is the single most important indicator other than the stock price. Every penny stock trader who utilizes chart patterns for finding trade setups knows how critical volume is when it comes to trading success and failure.
When a penny stock goes up with high volume, it indicates strength. When a penny stock goes down with high volume, it indicates weakness. If you are on the wrong side of a trend, it could be costly.
For breakout traders, when a stock breaks out of a long term resistance, they put on a trade only if the volume is strong.
For traders who are looking for bargains, they put on a trade when a stock pulls back from a breakout with low volume. If a stock drops with high volume, that is a trouble signal for traders who want to go long.
To learn more about how to use the volume indicator, read the penny stock guide for beginners.
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