Trade concentration is when a single trader generates a significant portion of all overall prints from one side of the market in an attempt to push prices higher or lower.
What are illiquid stocks?
A stock is considered illiquid when the investor cannot easily liquidate the investments held. In other words, with illiquid stocks, buyers or sellers are not readily available. It is important to know about illiquid stocks because they are traded on an exchange. Owning a position in an illiquid stock means that shedding your exposure will come at a price far less favorable.
There is also a greater risk involved due to lack of transparency and regulatory oversight. While some illiquid stocks can be traded on an exchange such as NASDAQ, you can also find such stocks trading over the counter.
Factors common to illiquid stocks
The common underlying factors with illiquid stocks (including penny stocks) are:
low trading volumes
Price tends to move drastically
Wide bid and ask spreads
High risk factors
In case of penny stocks, company disclosures are limited.
Note: Illiquid stocks and penny stocks also tend to often fall under the regulator scrutiny. Sudden delisting is another scenario common to illiquid stocks. They are also susceptible to Price Manipulation, including Pump and Dump practice; these are all unlawful fraudulent market practices. Apply caution.