Term:THINLY TRADED

A term used to describe a share which has a very small number of shares changing hands each day. The first criteria which a private investor should look at when assessing a share is its average daily volume traded. As a general rule of thumb you should not buy any share if the volume traded on average every day is less than three times the value of the shares which you want to buy. Such a share is described as “thinly traded” or sometimes “tightly held” and you may have difficulty in selling out of it when you want to (i.e. on your stop-loss strategy). Shares which are difficult to obtain because the owners are reluctant to part with them are tightly held. These shares become thinly traded and are easy to spot because they have little or no volume traded and their price chart takes on a boxy “lego-block” look because the price remains the same for long period when there is no trade. Generally, it is not a good idea to deal in such shares.

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