What Are Active Stocks?
The term active stocks refers to corporate shares that are heavily traded on an exchange. Active stocks are frequently bought and sold, which means they have fairly high trading volumes. These stocks generally also have a large number of outstanding shares. Because they are heavily traded, active stocks often have low bid-ask spreads.
Active stocks give investors insight into the liquidity of these securities, how the market feels about these companies, and about price movement—whether they will increase, decrease, or remain the same. The term should not be confused with active investing, which is an investment strategy and an entirely different concept altogether.
- Active stocks are heavily traded stocks on an exchange or stocks that display a sizeable price movement within a single day.
- These stocks give investors insight into the liquidity of these securities, how the market feels about these companies, and their price movement.
- There is no specific volume benchmark to define an active stock.
- News developments, such as tender offers for the company or positive earnings, or a large number of shares outstanding drive the high volume of trading for active stocks.
- Active stock lists show investors stocks with the highest trade volume, the biggest gainers and losers, stocks with the highest daily volume, and the most active stocks by index.
Understanding Active Stocks
Active stocks frequently have a large number of outstanding shares. Because they are heavily traded on a daily basis and are usually available in high volume, active stocks often have a low bid-ask spread and are usually considered to have high liquidity. Active stocks tend to trade regardless of whether the price of the stock is fluctuating.
Shares of companies that are on various indices, such as the S&P 500, are typically considered active stocks. These are some of the biggest companies in the United States (perhaps in the world). Companies such as Apple (AAPL), Microsoft (MSFT), AT&T (T), Amazon (AMZN), and Walmart (WMT) are all active stocks because they all experience high daily trading volume.
Active stocks can also change over a specific time period. Good news released by a company, such as a tender offer, a new product launch, or positive earnings, and/or positive economic data that affects a certain sector may result in increased interest from investors. This can result in price swings and heavy trading volume, leading to very active stocks.
As mentioned above, don't confuse active stocks with active trading, which is a stock trading strategy. Traders who take part in active trading buy and sell stocks to profit from short-term price changes. Investors who trade actively do so through day trading, position trading, swing trading, and scalping.
Determining an Active Stock
There is no benchmark to determine the volume of what can be considered an active stock. Some analysts define active stocks as trading at one or two million shares per day. On average, more than 250 stocks in the U.S. trade more than five million shares per day.
While active stocks are usually indicated by volume, the term can also sometimes apply to sizable price movement, and most outlets will distinguish the difference between an active stock based on volume and an active stock based on price.
Exchanges and traders list active stocks every day with the volume and the day's gain or loss. Stocks may be actively traded because they have a large number of shares outstanding, or because of a special situation. For example, if there is a tender offer for the company or because of unexpected news.
What to Consider When Using an Active Stock List
Active stock lists are a great way to help you in your investment strategy. You can find the most active stock lists updated in real-time on any number of financial websites, including Investopedia. These stocks generally fall into one of four categories:
- Stocks with the highest number of shares traded
- Biggest gainers and losers by percentage, regardless of price or volume
- Highest daily volume, calculated by multiplying the stock's value by the total number of shares traded that day
- Most active by index, such as the S&P 500
It's important to remember that these lists are meant as a guide. Just because they're the most active stocks on any given day, doesn't mean that you should jump in and buy or sell all your shares. Here are a few factors you should consider when you're incorporating these lists into your investment strategy:
- Narrow down your list. Active stock lists can be fairly lengthy. Figure out which best suits your needs.
- Pick one index. Study the movers and shakers and compare their percentage movements from some of the major indices.
- Pre-market most active lists can give you a good indication of what's to come during the trading day. If you're a day trader, you probably won't care much about the after-hours list.
- Most active penny stocks may open you up to more risk, so decide if this is worth it.
- The list of most active stocks by dollar volume isn't something most people use unless they have a lot of capital on hand.
Most Active Stocks
Exchanges such as the New York Stock Exchange (NYSE) and Nasdaq provide daily listings of the most active stocks. This is typically restricted to the top 10 or 20 stocks with the highest volume of trade on any given day. These listings are similar from day to day, including stocks featured in major indices such as the S&P 500.
Lists change on a day-to-day basis as a result of market forces and are not restricted to stocks. Bonds, currency, exchange-traded funds (ETFs), and futures all regularly appear on most active lists. They are attractive tools for traders of all experience levels. Day traders tend to watch them for stocks with high volume and significant price fluctuations.
The three most active stocks trading on the Nasdaq by share volume on May 20, 2021, were Apple, Advanced Micro Devices (AMD), and Cisco Systems (CSCO). Technology stocks rallied throughout the day thanks to positive economic news. Fewer Americans filed for jobless claims—the lowest since the 2020 crisis hit.
Active stocks may or may not appear on Most Active stock lists.
Active Stocks FAQs
What Is the Difference Between Active Trading and Day Trading?
Active trading is an investment strategy. Traders who take part in active trading do so in order to profit from short-term changes in securities prices. Day trading is an active strategy meant for very experienced traders who buy and sell securities in a single day. Most day traders are well-funded, using leverage to profit on short-term changes in the price of securities.
Are Active Stocks Only Important for Day Traders?
Day traders use information about active stocks to succeed in their trading strategies. While these stocks are a big part of their everyday trading activities, active stocks are also beneficial to regular investors. That's because they provide investors with signals of when to buy and sell stocks, not to mention where the momentum is going in the market.
How Do I Find Active Penny Stocks?
Penny stocks generally don't meet the listing requirements to trade on major exchanges. This means you can find them on pink sheets and over-the-counter bulletin boards. Like other most active stocks, there are regular lists online that are updated regularly with the most active penny stocks.
How Can I Identify Active Stocks on Social Media?
Social media can be a great way to search for and identify active stocks. You can use sites like Twitter, which provides users with trending topics. This can help you determine market signals and how breaking news influences and moves stocks. Like any other investment tool or strategy, it's important that you do your due diligence and take the information you find online with a grain of salt. Just because it may seem like a great move on social media, it doesn't necessarily mean it is. Always do your research.