Is there ever a situation wherein you buy stock and then cannot sell it at the price listed because there are?

Question

not enough buyers, ie not enough volume? Penny stocks perhaps?

How does a person stand clear of these situations?

I am particularly concerned about the selling of a stock with a higher price than when I bought it and taking a loss because of lack of volume on the market. Which situations does this occur in the most often?

Answer 1

You have to be extremely careful when dealing with stocks with little or no volume. Almost every online Stock Quote service shows the average volume. So if you are interesting in buying 1,000 shares of a penny stock that only trades 10,000 shares a day, watch out.

Avoid stocks that do not trade every day, or only trade in really small volumes. The biggest problems with these type of stocks are:
1) There is often a large spread between the bid and ask, meaning you are guaranteed to lose money as soon as you buy it
2) The stock price can fall several percent (10%-20%) for no reason. No news, no rumors, nothing. Someone's grandmother died and they sold their shares. Avoid unpredictable stocks.
3) The stock price often has no relationship to the true value of the company. The company might have little or no revenue or earnings and be worth $10's of millions. The company could be one guy working out of his spare bedroom, and bankruptcy is just a bad divorce away....

I hope that helped. Generally, stick to stocks where there is at least the daily volume so you can get in and out easily and not lose money because of the huge spread.

Answer 2

good question, I got myself in trouble when I started trading with that exact issue (usually the stock price was dropping and there were no buyers for my shares).

So yes, there can be situations where you want to sell but there is no volatility and no volume in the stock and you're stuck with your shares until someone wakes up and buys them.

What you should be careful with is:
- check the volume of the traded stock you want to buy: is there good volume? (meanning do you see shares being bought and sold often)

Answer 3

No.

If there are not enough sellers then the price will drop until the number of sellers and the number of buyers is exactly the same.

With enough buyers the stock will rise all the way up to $100,000.00 (Just like Berkshire Hathaway)

With enough sellers the stock will drop all the way down to $0.01 (Just like Enron)

Answer 4

Yes. It happens all the time that the executed price is different from the bid price when you place the trade.