Keyword Density

The keyword density tool is useful for helping webmasters/SEO's achieve their optimum keyword density for a set of key terms/keywords.

Keyword density is important since search engines use this information to categorize a site's theme, and to determine which terms this site is relevant to -- the perfect keyword density will help archive higher search engine positions. Keyword density needs to be balanced correctly (too low and you will not get the optimum benefit, too high and your page might get flagged for 'keyword-spamming').

Keyword density refers to the ratio (percentage) of keywords contained within the total number of index able words within a web page. The preferred keyword density ratio varies from search engine to search engine. In general, I recommend using a keyword density ratio in the range of 2-8%.

*keyword density rating should be between 3% and 5% of the total number of words per page. This means that for every 100 words you need to repeat your primary keywords between 3 and 5 times.

Calculating Keyword Density

To calculate how many times your primary keywords should appear on a page, you divide the number of times each keyword appears on a page by the total number of words per page. This figure is divided by 100 to find the keyword density rating. For a 240 word page this would be:

Based on a keyword density rating of 3% to 5% this means your primary keyword phrase should appear between 7 and 12 times on the page.

Recommended keyword density may vary when competing web sites have a higher density than your page. If a competitors site ranks at 7% then it may be necessary to increase keyword content or reduce the size of your page to match the densities of a competing site.

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Reference:
http://www.kevinpye.com