Penny stocks trade a lot less than listed stocks causing extreme volatility in price and volume.  They could
    trade 500 times one day and 50 the next making volume statistics hard to read.  The only way to judge liquidity is
    by following stocks for a few months and simply going by feel.  1000 trades per day is heavy for tiny stocks but
    keep in mind that active NASDAQ stocks trade 5000 to 20000 times a day or more.  Increasing volume can cause
    price stability or fluctuation depending on the day.  Our job is to follow price and volume and sort out the
    overplayed issues and stick with the forgotten heroes that will likely rise again.  Take a guess as to how many
    traders are active in micro caps and you'll see that it's easy to find where they are or aren't.  The penny stock world
    is like a microcosm of the equities market even after making huge leaps and bounds the past few years.  It's how
    the NASDAQ started and if it gets too big there's sure to be a new small cap market right behind it.

The best way to judge liquidity in micro caps is to have a huge watch list with as many stocks under, say, $10.00
as you can get.  There are usually two to three thousand stocks on the OTC BB that trade at this level on any given
day.  Never get rid of symbols on your list even if they get into the dollars.  Micro caps trade so infrequently that you
can fit a ton of them on a watch list without using a lot of bandwidth and therefore have less interruption in
quotations.  Once you have a ton of stocks, or even all the stocks in the OTC BB, line them up according to dollar
volume or trades per day.  If you watch this volume for a couple of months and try to pay close attention to the top
25 or so, you will begin to be able to judge overall market activity easily.  Watch where everyone goes throughout
the day, including Market Makers, and you will begin to realize how small of a market this really is.
    Acute Liquidity
    PSW Staff
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    Ever wonder how an OTC BB stock can trade 500 times one day and 50 the next.  In this tiny universe stories are
    played out very quickly and everyone involved demands instant gratification.  Here stocks can go from a 52 week
    low to a 52 week high and back again in a day.  Look for issues that are slowly moving up the ladder of trades per
    day but have not quite hit 500.  These are the ones that will continue to add buyers and slowly move up.  Stocks
    that suddenly hit a 1000 trades per day and are up 100% are typically a flash in the pan.  Look for companies with
    an interesting story to tell that will cause scrutiny and interest in the stock price.  Securities that are on your daily
    gainer list are there because one interesting story came out.  These securities will live a short life without
    anything of longterm value that will keep Market Makers paying higher prices.  This is why we see the same
    stocks on the daily loser list the next day.  Slowly gaining momentum stocks are few and far between in the penny
    stock world so when you find one don't expect it to last.
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