Why trading volume is not a key consideration for trading liquidity

Why trading volume is not a key consideration for trading liquidity


Okay. So, why is actually trading volume so pointless
during the initial screening? Let me just quickly show you an example. So, this is a actually the Investagram’s screener
screening tool. And, very luckily, they actually started providing
for Singapore-listed stocks very, very recently. In fact, I think last weekend only. And that’s the reason why I have a chance
to actually try it out. Before that it was really just on Phillippine
stocks. So, I had a chance to take a spin on this
screener, and I find some useful feature. And I’m going to use this to help explain
to you why trading volume is actually quite pointless. It is because I have actually done a screener
based on the trading volume for at least the stock that has the highest trading volume
in this very day itself, after the market close. Alright? So, as you can see over here, look at the
number one most active stock in terms of trading volume. It has on that day, they have 100 million
shares traded. Alright, so from the look of it, you might
think that this stock is wow, this stock is a very, very liquid stock. But the fact is, it is not. And one of the easiest way to take a look
is you just take a look at what is the price of the stock itself. So, in this case, the price of this stock
is actually 0.5 Singapore cents. So, it is really a very, very low price penny,
super penny stocks. And, in fact, if you take a look at what is
the actual trading valuer on that particular day, despite having 100 million shares being
traded, is that the actual traded value for that day? There is only $500,000, okay? So, for some of you listening in to this webinar
right now, some of you may even have the capital to actually buy up the entire trading volume
of this particular stock on that day itself, believe me or not. So, that is the reason why trading volume
is really pointless when you do not actually consider what is the actual price of the stock
on an instrument you are looking at at that point in time.

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