All About The Float Shares — Global Trading Software

Floating Stock: Definition and Example

One of the most essential components of the public trading market is free float stock. Float Shares is our learning topic for today.

These are shares of a company that is open to the public for trading and investing. They are the subtrahend of a company’s total amount of shares and restricted and closely held shares.

By now, you may feel confused by all of this jargon and ideas, and that’s perfectly fine.

Entering the trading market can be tough, especially when you’re doing it alone.

That’s why we’re here to elaborate on the whole float shares concept to you. This includes examples, calculations, and even tips!

Ready?

How Does Float Work?

A stock float is a share of a company that is accessible to the general investing public. These shares and bonds are float in the market. Investors buy and sell them millions of times.

A company’s private shares are what limits its float shares. So basically, the quality and quantity of float shares greatly depend on the said restricted and closely held shares.

But these are both controllable variables, which means that a company can manipulate them depending on the market’s demands.

One of the examples would be when a company releases an amount of restricted and closely held shares to produce high float stocks.

What Is A Stock Float?

The description we provided above may have fuzzed your brain. So let’s look at it the other way around.

Stock floats are shares of a company that anyone can buy or sell, even you!

These floats come from the company’s total shares, which are what we call shares outstanding.

But this doesn’t mean that all the company’s shares are stock floats. Some of them are restricted and closely held shares.

Now, don’t let this confuse you!

The restricted and closely held shares are only those that the company’s directors, executives, stakeholders, and others own. So what makes them different is the fact that these people don’t belong to the general public but to the company’s board instead.

Stock Float Advantages

The float stock market and its total count is a crucial component to the traders’ and investors’ success in their securities.

Not only does this number reveal the total available float shares open for buying and selling in the market, but it also reveals the number of restricted and closely held shares.

Float shares come in two kinds, high float, and low float stocks. Unlike the common “one is better than the other” combination, both high float and low float stocks are beneficial to investors. But the degree of benefit greatly depends on their commitment to the investment itself.

Now, what does this mean?

Low float stocks are volatile shares that occur when there are too many restricted and closely held shares in a company.

Investors in active trading often buy these kinds since their prices change greatly over short amounts of time. So these kinds of float shares are beneficial to investors who are looking for a short-term investment with high risks and rewards.

On the other hand, high float stocks are steady and are a result of barely any restricted and closely held shares. They are the exact opposite, and they tend to attract long-term investors.

Floating Shares Formula

Although there isn’t much math when it comes to float shares, solving comes in handy when you want to reveal the amount of stock float a company has.

In order to do so, you’re going to need two things: the company’s total restricted and closely held shares and their total count of outstanding shares.

To reveal the total float shares, you will subtract these two variables from each other. It’s as easy as a cake!

Float Shares Example

If you’re still having trouble comprehending the whole idea of float shares, here’s an example:

Say that a company has 10 billion shares outstanding as of today.

Out of the 10 billion shares outstanding, 0.10% of them are held closely, while 50% are restricted. That totals 50.10% or 5.01 billion of the company’s shares.

The remaining 4.9 billion shares are what we call floating stocks. They are available to the public for both trading and investment.

Don’t forget to also understand where each stock is within its cycle within a trend. The Elliott Wave Indicator is a perfect tool to measure this.

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