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Understanding Float in 3 Minutes
Learn what float is, why it matters, and how it creates explosive moves.
What is Float?
The float is the number of a company's shares that are available for public trading. It excludes shares held by insiders, major shareholders, and restricted stock. A company might have 100 million shares outstanding, but only 10 million in the float — meaning only those 10 million are actually trading hands.
Why Float Matters
Low float stocks (under 20 million shares) can move extremely fast. When demand suddenly increases and there aren't many shares available to buy, the price shoots up. This is why low float stocks are the bread and butter of momentum trading.
Real Example
Imagine a stock with a 5 million share float. If a major catalyst hits and buyers want 2 million shares, that's 40% of the entire float. The price will explode because supply is severely limited. Compare this to a stock like Apple with 15 billion shares in its float — even massive buying barely moves the price.
Key Takeaway
Always check the float before trading a small cap stock. A low float combined with a catalyst is where the biggest moves happen — but also where the biggest risks lie.
Key Takeaways
- Float = shares available for public trading
- Low float (under 20M) = explosive potential but higher risk
- Always check float before entering a trade
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