Low Volume Stock Trading
Summer is typically a quiet time in the stock market. The old saying is to sell in May and go away as less money flowing into the market over the summer months decreases trading volume and tends to cause a slow decline in prices. And low volume stock trading can be tricky as technical analysis of stocks is more accurate at high volume. Additionally, liquidity may suffer in lightly traded stocks adding risk to low volume stock trading. Nevertheless, the US stock market has been going up since the start of May as manufacturing numbers from the USA and China as well a promising US jobs report imply a continuing global economic recovery. The SPDR S&P 500 started May at $188 a share and ended at $192 a share. Now as July starts it is trading at $198 a share.
Putting on Your Investor Hat
When low volume stock trading makes short term technical trading less accurate a good idea is to think like a short term investor, consider the fundamentals and trade accordingly. This is swing trading and you will typically hold a trade for a few days to a couple of weeks. In this case low volume stock trading is not so risky as you are not looking to profit based upon second to second statistical analysis but rather your own analysis of the economy, global events and Federal Reserve policy decisions.
Low Volume Stock Rallies
Standard thinking has it that a rally is not a bull market until it occurs at high volume. But, if you bought stock ABC at $7 a share and it is not trading at $30 a share what do you care about volume? The concern of the experts is that if a rally is not supported by volume it will likely cool off and back up taking your gains with it. But, we are not talking about long term buy and hold investing here.