Saturday, July 10, 2010

Total_Delivered_Qty / Total_Traded_Qty

I was just reading a book which suggested how to pick up small cap stocks for screening, for beginners. It enlisted some few benchmarks, one of which was that the stock should have its daily_trading_vol >1M and <25M. This figure is calculated as - close_price * avg_vol_traded_for_last_5_days. I just happened to look at for a sample of such a figure and noted that they have not one, but two figures indicating avg_traded_qty:
  • total_traded_qty
  • total_traded_qty_delivered
Mystical figures, they seemed at first! But with some googling, I figured the difference. Let us say 100 shares of IBM were traded on 27th June, 2010. For simplicity, one share is traded between one unique buyer and seller. So, it means, 100 ibm were bought and 100 ibm were sold. But it doesnt necessarily mean that all 100 ibm's that were sold were actually delivered to those 100 buyers. A person might just buy 10 ibm in the morning session and square his position buy selling 10 ibm in the closing session. As we see, no delivery was made here, just plain trading was done. So, total-traded_qty might be 10, but total_traded_qty_delivered is zilch. Interesting.

So why would anyone want to do this? Large traders might just choose to do heavy buying at the start of trading to make the prices artificially go up. And then, they might sell off all those shares towards the end session and pocket the difference.

Implications? If the percentage of Total_Delivered_Qty / Total_Traded_Qty is less, it means the stock price movements are more manipulated than based on fundamentals. So beware when calculating close_price * avg_vol_traded_for_last_5_days! Make the right choice for the second term.

1 comment:

  1. Which Book ?
    Can u plz tel the BOOK on 'how to pick up small cap stocks for screening, for beginner'