I’ve been having FOMO all week!
There are so many opportunities out there right now and I can’t stop talking about it…
In fact, I’ve barely had enough time during my Premarket Prep to go over all the trades I’m seeing right now.
I guess that’s a good problem to have though.
Many of the plays I’m seeing lately involve low float stocks. These things can definitely give us big returns, but you have to know how to trade them.
Low floats are back in action and I’m excited, hence the FOMO attitude, because they’re some of my favorite stocks to trade.
They can move really fast and really big… They are perfect for day traders.
I’m not just talking smack here either…The proof is in the pudding. Our Oracle system has identified and alerted us to tons of low-float winners.
And if you’re not familiar with Oracle, you should be.
Our proprietary trading tool scans the entire market every morning, looking for price patterns and trends. It then applies its magic — actually, its algorithm — to generate a list of 20 potential big gainers, along with a green (bullish) or red (bearish) signal and entry price.
I couldn’t trade without it and neither should you!
Getting back to low float stocks, I’ll show you exactly why they offer so much upside opportunity and what to look for when you see one.
Table of Contents
First, let’s define a low float stock:
A low float stock is one with a relatively small number of shares available for trading in the public market, specifically less than 10 million.
That’s not to say that the company doesn’t have a lot of shares overall. In fact, they might have millions, but most of those are often held by institutional investors, employees, or other major stakeholders.
Imagine a company with 50 million total shares, but only 10% of those are available to the public. That means traders only have access to 5 million shares, creating a unique dynamic that can make these stocks incredibly attractive.
The simple concept of supply and demand rules the day.
At the core of low-float stocks’ explosive potential is a simple principle of economics: supply and demand.
Now, imagine a scenario when a catalyst hits, like a new product launch, an earnings beat, or a big Wall Street analyst upgrading the stock.
Suddenly, traders come out of the woodwork, wanting to grab up these shares….And with so few shares available, even a relatively small increase in demand can drive the price up dramatically.
Remember Beanie Babies, anyone?
This imbalance between high demand and low supply creates the perfect storm for significant price movement.
Low float stocks are very news-friendly.
Events or announcements don’t affect larger float stocks the way they affect low floaters.
In a low float scenario, the fewer shares available mean that more traders are competing to buy those shares, pushing the price up rapidly.
And this is where the upside potential comes into play. When a low float stock catches the market’s attention, it can experience exponential growth in a very short period of time.
Traders who are quick to spot these opportunities can capitalize on the rapid price increases, often turning small investments into big profits.
Serve Robotics Inc. (NASDAQ: SERV) checked all the right boxes on Wednesday.
Low float? Yes: Around 22,000 shares
Big news: Yes, it reported positive revenue and earnings growth premarket.
More big news: Yes, shortly after that it announced a new delivery partnership with Shake Shack Inc. (NYSE: SHAK) and Uber Eats.
SERV 2-Day, 5-Minute Candles Chart; SteadyTrade
SERV spiked from around $12 per share premarket to a high of $14.44 for the day. That’s a 20% gain in around two hours, which is nothing to sneeze at.
If you want to play low float stocks, you need to be on top of all the financial news.
But that can be tedious, especially for names like these that don’t exactly make the front page of the Wall Street Journal when something happens.
Here at StockstoTrade, we have our own service that does most of the heavy lifting for you.
Breaking News Chat is a financial news chatroom led by veteran Wall Street traders, each with over 20 years of experience. They get you the information you need before anyone else, which is really important for accessing company news that doesn’t make the front page.
Get ahead of the market with the news you can use!
The role of market psychology
Market psychology plays a huge role in the movement of low float stocks. FOMO can be a powerful force. I’m experiencing it myself right now…
When traders see a low float stock beginning to move, they often jump in, hoping to catch a piece of the action before it’s too late. This increases the momentum of the stock, creating a feedback loop that drives the price higher and higher and faster and faster.
But it’s not just about FOMO. There’s also the element of surprise that attracts new buyers.
Because these stocks are often under the radar, when they do start moving, the speed and intensity of the move can surprise even seasoned traders.
A low floater can go from quiet and unnoticed to the hottest stock of the day in no time.
And don’t forget about liquidity…
One of the reasons low float stocks can move so quickly is their limited liquidity. With fewer shares available, even small trades can have a big impact on the stock price.
And this is great if you’re on the right side of the trade.
But lack of liquidity can be an awful thing if you’re not. If sentiment changes, the effects will take hold fast and if the stock starts moving against you, you could have a lot of trouble finding someone to buy your shares.
That’s why it’s crucial to have a solid trading plan and be prepared to act fast when trading low float stocks.
I make it a point to review all the setups together, with specific instructions on how to play them, or not to play them during my daily Premarket Prep so they can be ready when the market opens.
I wasn’t kidding when I said low float stocks can produce big gains…
We got the green buy signal from Oracle for the following low floaters:
On August 7th: Aditxt Inc. (NASDAQ: ADTX); Current Float: 3.26 million shares
On August 12th: Greenlane Holdings Inc. (NASDAQ: GNLN); Current Float: 530,000 shares
GNLN had news that day as well, which gave a nice rocket boost to the stock’s spike.
GNLN Oracle Chart
Also on August 12th: PS International Group Ltd. (NASDAQ: PSIG); Current Float: 510,000 shares
And the latest one on August 14th: Nuburu Inc. (NYSE: BURU); Current Float: 460,000 shares
My final thoughts…
Low float stocks are all about potential—the potential for rapid, outsized gains driven by a perfect storm of supply and demand, market psychology, and liquidity.
If you’re a trader who thrives on volatility and loves the thrill of fast-moving price action, low float stocks might just be your cup of tea.
But remember, as with any strategy, trading them does come with risk.
Educate yourself, practice in a paper trading environment before you risk your actual capital, and always have a trading plan.
Have a weekend, everyone. See you back here on Monday.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
If you love the excitement of day trading, you might consider adding options trading to your playbook…
My colleague and seasoned options trader, Jeff Zaniniri, has developed an AI-powered algorithm called GAMMA that exploits a market inefficiency, or glitch, within certain options contracts.
These glitches trigger alerts in his system, which Jeff will share with his GAMMA subscribers every Monday, Wednesday, and Friday.
Learn about the glitch that can make you a master options trader!