What's up everybody? All right? So today we're going to talk a little bit about day trading terminology and the term we're going to talk about is float. I Get a lot of people asking me questions about float. What is float? Why is it important? How does it affect the stocks that you're going to trade? So this is going to require understanding a few other terms that are going to help you really get a sense of what float means. So we're going to go through a few terms and I'm going to show you some examples of low float stocks versus thickly traded stocks or heavy float stocks.

Alright, so when we talk about day trading terminology, float is something that is going to come up a lot. Now when a company does its initial public offering, that's the IPO What they're doing is they're selling shares onto the open market and those can be bought by anyone interested in, you know, taking a piece of the company. When a company does its IPO They're releasing a fixed number of shares onto the market and that becomes the float. The number of shares available to trade is the float.

So let's just say for example, a company does a 10 million share IPO and those shares are priced at $10 a share. They're going to raise a hundred million dollars from that. IPO Now that money can go towards investing into the company infrastructure, building, factories, strategic investments, etc and obviously is an obligation of now being a publicly traded company, they have to show their shareholders what they've done and the profits they've made on the quarterly and annual basis. So the important thing to understand there is that every single day we're all trading, when we trade a stock out of the same pool of shares that 10 million share flowed.

that is the amount of shares available to trade. Now typically it's it's not going to change on a day to day basis. So when you're buying shares, you know you're buying them from a seller. When you're selling shares, you're selling them to a buyer.

So we're just exchanging shares with in this same pool. That pool is the float. So what supply and demand will tell us is that stocks that have a low float? well, they've got less supply. They have a smaller amount of shares available to trade.

So in an instance where there is very, very heavy demand, we get the imbalance between supply and demand. And that's when we can get parabolic moves. So as traders, one of the things that we look for our stocks that can be volatile. So let's look just D our YS This is a recent example.

This is a stock that literally this is not exagerating. Went from four dollars a share to over a hundred dollars a share in four trading sessions, right? That's pretty crazy. Well, that's a relatively low float stock. so I can type in d Our YS here and I can see that the float is 21 million shares.

Okay, so the float is fairly small. Now that's relative. So let's look at another company. Let's look at Bank of America Bank of America you can see has been on a pretty big run here from 17 up to 22.

But generally speaking, this is not stock that makes really big moves. The float is 10 billion shares. All right. So for this you know this is like a 20% move, which is pretty massive considering the you know the type of volatility that stock usually sees.

You know pretty much trades in range. So the value here for an investor is that this type of stock is usually going to be safer. You're less likely to see huge moves either. To the upside of the downside, so it's a little bit more predictable.

Let's look at another sucks. we'll look at Spring. This is another stock that trades in a fairly narrow range on any given day, and especially in terms of day trading. This is what the intraday chart looks like.

You know, not a lot of range. Look at Siri This is another one that shows very little range. We're trading in a 10 cent range here. Now when we look at the level 2, this is the other thing we'll notice.

A stock that has a very heavy float. A very large float is going to be thickly traded. It's going to be more crowded. You have hundreds of thousands of shares of buyers on the bid and sellers on the ask.

Right now, if I was thinking about day trading the sky I would look at it and I'd be like, well, doesn't look like it's going to move very much because there are so many sellers that need to move out of the way before it's going to move up even a penny. And guess what? at the next penny, we're going to see the same number of sellers sitting at 54 or 55 56 57. So it's a stock that's not very volatile. Again, as an investor or long-term investor, that's good.

That's what you want, right? You want safe, relatively predictable. But as a day trader, we want volatility, So that means we're going to focus on stocks with lower floats. and it's a threshold. I Focus on stocks with a float of under a hundred million shares.

All right. So you can see all of these stocks here. We're listing the float in this column. This is the float column.

so this is an 11 million share flow. This was 41 million, 44 million. This one's very low. only nine hundred and forty thousand share float.

The yellow ones are marked because they are definitely going to be the stocks. I Have the potential to make big moves. Let's look at G lbs. This has a float.

Well, it's not listed here. This float is under a million shares and this is a stock that as you can see here G lbs. Let's see where go forward. There we go: G lbs.

This went from three dollars and thirty five cents up to twenty three dollars and sixty cents. Okay, that's a huge move. All this really was was a huge imbalance between buyers and sellers between supply and demand. This is a day where we really didn't have very many sellers and the stock just squeezed up.

Limited supply with heavy demand could create an explosive situation. So the important thing first and foremost is to look for stocks that have lower floats. and then the next thing is to look for the catalyst that will drive demand. So the way I do it is every single day I Open up my watchlist here.

my open up my scanners and I start looking at the stocks that are gapping up. So I move this out of the way. these are the stocks that are gapping up. Now they're gapping up for a reason.

A stock doesn't look like it's going to open 40 or 50 percent higher than it closed day before without some type of catalyst. So I look through this list of the top 10 biggest gapper and then I simply go on market watch stock Twits or I ask in our chat room. Does anyone see any news on this stock? What's the catalyst? What's going to drive this higher? If I see that there's good news like earnings or there's you know, whatever it might be. Maybe they got a new contract for a big order or something like that.

That's going to tell me this is a stock that has potential and lots of traders are going to want to get a piece of the action Now over the years what I've done is I've been able to put together a watch list of former runners which is right here. These are stocks that in the past have made big moves just like Gee Lbs. All right, guess what? history repeats itself. So these stocks would have made big moves in the past.

They often mean us see these big moves again because they have the right criteria. They have the low float and so really all they need is the catalyst. So anytime we have news on these types of stocks, we can have explosive breakouts you can see here like La Ke. this is a company that makes biohazard suits to low float stock and it's squeezed here from about seven eight dollars up to $28 per share.

Now the float right now is let's Lake and I'm looking at trade ideas. Six Point seven, eight million shares so it's a very low flow. That's another one. DGL Why digital? Ally These guys make body cameras that a police officers wear so during the some of the shootings and violence stuff that we've had over the years.

If this comes into play as you know people start to speculate. maybe Congress will make it a law that all police officers need to wear body cameras. Well, that's certainly good for the maker of the body cameras. And this stock squeeze from eight dollars to thirty two dollars now I can show you tons of examples of stocks like these and what I've done is I've gone through all of them and really narrowed down the common denominators.

What do these all have in common and how can I find these before they make the big move? I know they all share low floats and so I start every morning by looking at the stocks that have low floats and seeing if they have a on catalyst. Now there are a few ways a float can change. Alright, so I want to talk about this here just so you understand these these three scenarios. The first way a float can change is if a company performs a share buyback.

All right now. You guys are probably heard about this before. No. Apple doing a massive, you know, multi-billion dollar share buyback program.

All right. This is when the company buys back some of the shares that they sold during their IPO What that does is it reduces the flow and it increases the value of the company. So it's almost like let's just say for example, when the company did IPO it's like filling up a cup of coffee. and when you do a buyback, you're decreasing the coffee in there.

but you're increasing the value. It's like turning coffee. into espresso, right? It's stronger. It's good.

For shareholders. The value goes up. Everyone that's owning stock, they're going to see an increase in the value. All right, value goes up.

The float goes down. Now, what a company can also do when this is going to be adding water to the coffee is they can do a secondary offering. A secondary offering is after the initial public offering, and even if they do a third or fourth, it's still called a secondary offering. And what it is is, its selling more shares onto the market.

Its selling more shares to raise money. And companies only really do this when they need money. So this is not something that's really good news for a stock. And in fact, it's probably no surprise that Dro is did a secondary offering and I'll pull back the daily chart here.

They did this to raise money and the stock promptly went from on this day here: $54 all the way down to $10 a share. That was a big drop. They did a secondary offering. They raised money.

They're diluting the value of the stock. They're releasing more shares onto the market. The float is going to increase. So if a company does secondary offerings and things like that, the float can go up.

If they do a share buyback program, the float will go down now because I often trade small-caps stocks under $10 These companies rarely do share buyback programs. they can rarely A4 - these are small caps. They're low. You know, low price stocks.

They're not usually the most successful companies out there. You know they're emerging. Some of them have the potential of moving their way from small cap to mid cap to large cap, but a lot of them will struggle in the small cap price range for a long time. So what we see more often in this price range, our secondary offerings all right now.

The third way the float can change is with a stock split. All right now. we'll bring back Apple again. Apple Recently Well, not super recently at this point.

But they did a 7 to 1 stock split. So remember the stock was trading at $700 a share and I think the problem there was it. It was priced really high for retail traders. You know, retail traders that wanted to buy it just simply couldn't afford to.

Just you could buy a couple shares. But it just seemed like what's the point. So what they did is they did a 7 to 1 stock split. So everyone basically what this did is it.

It changed the flow. So if you're holding a thousand shares has $700 after the stock split, you would now be holding 7 thousand shares at $100 This is kind of like taking $100 bill and turning it into 20s. You know it's It's not that you've really changed the value of what you have, you've just changed the price. All right.

And you've had to change the quantity of bills you have. You know to equal the same price. Now when you do a stock split now every you know, thousand shares turned into 7,000 and the float goes up. All right.

So that increases the float. Now what some companies will do. And again, this is something we see a lot with the small caps is they'll perform a reverse stock split. so it's a it's required that stocks on NYC and NASDAQ exchange that they trade over $1 Now stocks that are trading below $1 can risk getting delisted and then they're going to move on to the OTC exchange.

You know? And and that's not something that's that's not a good move for a company you they want to stay listed if they are already listed. So what they sometimes will do is a reverse stock split. So that means if the current trading price is let's say 90 cents or a dollar, it's just hovering just above that minimum price. They could say, well, let's do a ten to one reverse split.

We're going to change the price from $1 to $10 a share. All right, and then we'll be in good standing. So if you were previously holding a thousand shares of $1 now, you'd only be holding a hundred shares at $10 Again, it's just like changing in the 20s for the 100 I mean the the value hasn't really changed in that sense. But what does change is the float because now you're making the float smaller.

What used to be a thousand shares is now only a hundred shares. And when that happens across the entire float, your float is changing ten to one. right? in this case. that has the effect of you know, making some of these stocks more volatile.

When you reduce the flow, you reduce the supply. The number of shares available at rate and G BSN is a classic example of this. This is a company that is now trading at one penny. They keep doing reverse splits so they can stay listed on the exchange and when we start to pull the chart back, you can see they've done so many reverse splits.

When you go back to, you know where this was priced at. Let's say, even just about a year ago, it'd be nearly a million dollars a share. Because they keep doing these reverse splits, the stock keeps selling off. I Mean you can see this.

It's almost hard to even read this chart because of how much it just continues to drop. So this is obviously you know not. It's not a very strong company, right? If it's a strong company, they wouldn't have to keep doing these reverse stock splits. So this is the type of thing that we see with small caps.

You know these stocks that they you know they do secondary offerings. they, do reverse stock splits and sometimes these are just a few steps away from bankruptcy. which is, you know, obviously the end of the road for these for these stocks or getting delisted, which is certainly close to the end of the road. So the important thing to know is that float is a very important criteria when you're looking at stocks.

It'll help you understand the potential volatility. As day traders, we like volatility, so we're going to look naturally for stocks that have a lower float. but as long term investor you're typically going to be, you know, a little bit more cautious with volatility and looking for more stability, right? So it really depends on the type of trader you are you know, and what your your outlook is. whether you're looking for 10 minute, 20 minute hold times or like you know, 10 week, you know, twenty week type of long-term holds.

All right. So the way I do you know my day? Every single morning starts by going over the scanners, looking at the top 10 GAAP errs and then checking the float. Why is the stock gapping up I Can check float right here and trade ideas I Can also just log into the chatroom and ask anyone in our room. Alright, so today we've talked about the definition of float which also required talking a little bit about the definition of an IPO, a share buyback program, a secondary offering, and a stock split.

Alright guys, so if you have any questions, please feel free to email me Ross at Warrior Trading Com or feel free to put your comments in the video below. Alright, thanks guys! hey guys! I Also want to remind you to subscribe to our YouTube channel. You can click by subscribing. that way you can get alerts when I upload new videos like my teaching you had a day trade video or the video right toward a thousand dollars into eight thousand six hundred dollars in one month.

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