31 Oct 2018

WHAT IS ‘Active Stocks’

Active stocks are heavily-traded stocks on an exchange. Active stocks are actively bought and sold, and often have a large number of outstanding shares. Because they are heavily traded, active stocks often have low bid-ask spreads as a result of their increased liquidity.

BREAKING DOWN ‘Active Stocks’

Active stocks are securities which are heavily traded on an exchange,  and frequently have a large number of outstanding shares. Because they are heavily traded and are usually available in ample volume, active stocks often have a low bid-ask spread, and are usually considered to have high liquidity. Active stocks tend to trade in heavy volume every day, regardless of whether the price of the stock is fluctuating.

The stocks which comprise indices such as the S&P 500, for instance, are typically active stocks. Companies such as Apple, Microsoft, AT&T, Amazon, Ford, General Electric, Target and Wal-Mart tend to see daily high trade volume.

There is no specific volume benchmark for determining the definition of an active stock. Some analysts define active stocks as trading at 1 or 2 million shares per day. On average, more than 250 stocks in the U.S. trade more than 5 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.

Each day, exchanges and traders list active stocks 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 such as there being a tender offer for the company or because of unexpected news.

Most Active Stocks

Exchanges such as NYSE and NASDAQ provide daily listings of Most Active Stocks, typically restricted to the top 10 or 20 stocks with the highest volume of trade on any given day. Most Active Stock listings are frequently similar day to day, including stocks featured in major indices such as the S&P 500. From day to day, this list changes as a result of market forces, and is not restricted to stocks. Bonds, currency, ETF and futures all regularly appear on Most Active lists.

Most Active lists are attractive tools for traders of all stripes, and day traders tend to watch Most Active lists for stocks with high volume and significant price fluctuations.

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