What does 'thinly-traded' mean?


Thinly traded securities are those that are traded in low volumes and have high bid-ask price spreads.  Due to the items listed above, thinly traded securities are rarely traded on major stock exchanges, and almost exclusively reside in over-the-counter exchanges.


Thinly traded securities do contain significant amounts of risk that each trader should be aware of.  First, they tend to be very illiquid securities, so converting them back into cash is consumes both time and money.  Second, the prices of thinly traded securities fluctuate dramatically both from an intraday and day-to-day perspective.  Given the challenges and risk associated with thinly traded securities, they should only be purchased as part of a specific trading strategy.