What Makes Stock Prices Move Up & Down?

Do you know why some of these stocks make some of the biggest moves they do, the mechanics, and the reason, and the rationale behind it? Today I’m gonna break it down for ya.

Today we’re gonna get into the weeds, we’re gonna talk about the underlying mechanics of why some of these stocks move. We’re gonna break down some terms, some you know, jargon, I guess you would call it, and really kinda get behind why these stocks move.

Now you might say, I don’t care why they move, I just wanna make some money. But I think you need to have a broad market knowledge and understand why, the how and the why. I mean if you’re doing anything, I think you need to understand the background, the history, the mechanics of why these stocks move, and the terms I wanna talk about today are, float, float rotation, supply and demand, and again why these stocks move, and I’m gonna talk about some theory, I’m gonna give you some resources to look up and research as well, so get ready to learn.

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Low Float Stocks

So one of the biggest, I’m gonna focus on low float stocks, because these are the stocks that you see move 20, 50, 500, literally 1,000%. I mean, sometimes, not everyday, but a couple times a year, sometimes once a month, depending on the market, you’ll see stocks that move literally 1000%.

These are what’s called low float stocks. The float is the freely tradable shares of the stock. That is the supply. Remember stocks move because of supply and demand, at the end of the day.

So, the freely tradable shares of the float, these are shares that aren’t locked up, held by insiders, et cetera. Those are the shares that are being recycled through the day.

Why do we care about that? Think about basic economics. I’m guessing you’ve had a high school economics class, college economics class, you know smaller supply, more demand, what’s gonna happen to the price? Goes up fast, okay.

Just like if you’re going to the gas pump, and you’re like, wait a minute, why is gas a dollar a gallon more than it was yesterday? Most likely, there was a tanker explosion, or a cutoff in supply from the Middle East. Less supply, the demand is still there, the price goes up.

So that’s why we look at low float stocks. Low float stocks, write this down, typically less than 10 million shares, freely tradable. You can find this information really quickly and easily in StockstoTrade, should be featured in any platform, we have it prominently featured everywhere in StockstoTrade.

Now, 10 million is kind of the general consensus, but for the really low float stocks that make the huge move, you’re looking at 5 to 1 million, even down to 500,000 shares. So know float, next term is float rotation.

Float Rotation

That is the idea that, remember, if there’s only a million shares
that can possibly be traded, you have to have new buyers coming in and have to have sellers coming in in order for the stock to be traded.

If the stock is traded, has a million shares, and it’s traded 2 million shares on the day, that’s two times the float.

There’s gotta be new buyers, there’s gotta be sellers, and there’s gotta be somebody willing to bid up or there’d be no price movement. Think about it.

If I, let’s make it simple, If I bought all 1 million shares of a low float stock, I cornered the float, it’s called.

And I’ve got all these shares. I’m not gonna sell unless someone says I’ll give you two bucks. I’ll give you three bucks, I’ll give you four bucks. Now what happens?

I bought all million shares at a dollar. Another big investor, and remember there’s millions of traders, this is just simplifying it, he comes along and says I’ll give you four.

What happened?

That stock just changed hands, it went up 400%. That’s what we’re looking at, that’s what we call float rotation. That’s more buyers coming in, more sellers coming in, and this is something I want you to google and know, it’s the greater fool theory, okay?

The idea behind the greater fool theory is I’m buying this stock not based on the fundamentals, not based on the future prospects, I’m buying it because I think that there’s a greater fool out there that’s willing to pay more.

So when they go through a million, two million, three million, four million, sometimes, 60 million, 70 million shares traded, there’s a good chance that that stock is going to continue spiking through the day.

So understand supply and demand, understand float rotation, and especially, this is the key, as these late day moves, I know a lot of you, especially under the PDT, wanna spot these late day trades, look for the float and look for the float rotation.

’cause there’s a good chance you got a million float stock, that’s traded 50 million shares, and this happens quite frequently these days, if it’s trading 50 million shares into the end of the day, that’s all new buyers. That’s all more greater fools.

So there’s a good chance you can buy and sell to that greater fool, late day. Understand supply and demand, understand float, float rotation, and why these stocks move, and please comment below with that question.

This is a common, common question I get asked a lot about float and float rotation. I would love to answer your questions in the next article, drop it below and I look forward to seeing you next time.

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