One mistake that many traders make is to trade stocks that no one else trades. Such illiquid stocks are more dangerous than you might think. If a stock trades just 10,000 shares/day, then all it takes is one unexpected event to push the stock to extreme levels. If the stock is falling, those who own the stock will have a tough time finding buyers for all of their shares. If the stock starts moving higher, those who want to buy the stock (including short sellers who are now scrambling) will be unable to find shares at a desirable price. Avoid trading illiquid stocks. They are dangerous. These videos will help you understand more about the pitfalls of trading illiquid stocks.

Strategy Session August 5th, 2013

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