Float is the number of shares available for trading of a particular stock. The Floating Stock is important because it determines how liquid a security is. A company with a small float stock might find it difficult to sell all of its shares if demand increases suddenly. Conversely, a company with a large float can more easily meet increased demand from investors.It might seem counterintuitive that having fewer shares could lead to a higher stock price, but it can happen when there's strong demand from investors who want in on a good thing—or think there will be big profits down the road. In some cases, companies will deliberately restrict how many shares are made available to outsiders so they can keep tight control over their stock prices and maximize their own profits (think: early investors or company insiders).Floating stock is calculated by subtracting closely-held shares and restricted stock from a firm’s total outstanding shares. The difference between these two numbers gives you an idea of just how much freely traded equity is out there for buyers and sellers alike.If there are only a few thousand shares floating around, then it won’t take much volume to push the price up or down. This is why low float stocks can be so volatile – and also why they can offer such big profits (or losses) when traded correctly.There are pros and cons to investing in low float stocks. On one hand, you can make a lot of money if the stock moves in your favor. On the other hand, these stocks can be very risky because they tend to swing wildly in price.
