How To Buy Top Small Cap Stocks

Small Cap Trader — Mon, 06 Jul 2009 09:34:59 +0000

Although it may seem obvious to most stock market traders there are a number of simple rules that you can follow which will ensure that you have more success when buying small cap stocks.In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These stock indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock. For example the DOW30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).

Buy Small Cap Stock Companies That Have Money

Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to easily buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.

Be Cautious With Small Cap Stocks

It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime. Another consideration is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option inorder to protect your stock. Be very cautious about buying a stock just before it’s earnings release, stocks often drop significantly if you come out with a poor report. Earnings releases are 4 times a year with one of them being the annual report. If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.

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How To Buy Top Small Cap Stocks

Technical Analysis For Small Cap Stock Traders

Small Cap Trader — Tue, 09 Jun 2009 18:36:03 +0000

Technical analysis of the stock market, or any other market such as Forex, futures, is how most traders and investors make their trading decisions. This is as opposed to fundamental analysis which most people more agree is pretty much done as a way of making trading decisions, unless of course you are Warren Buffet!. You only have to think back to recent stock market scams like Enron to know that it is almost impossible for the average, and even very sophisticated fund manager or hedge fund trader to really know what the real financial state of a company is.

Do Research Before Buying Small Cap Stocks

Just by reading the balance sheet and other quaterly reports they release gives you a very poor insight into the real health of the company. Whereas the technical charts of the company tend to give the real picture of what the market thinks of the value of the company. In the case of Enron even simple technical analysis told you to SELL when the stock was in the $80-90 range, this is why technical analysis of stocks is so popular.

So what are the secrets to technical analysis?, I’m about to tell you, here are my golden rules:

* Only use 3-5 simple technical analysis indicators

* Make sure that you understand how the indicators that you have selected work, what the parameter settings are and in what market conditions they are effective

* After selecting your indicators and parameter settings don’t mess with them.

Technical Analysis Helps When Buying Small Cap Stocks

The real secret to technical analysis is to become VERY familiar with your choosen indicators, and really this can only be done by watching and studying the market, so that you get to the point that you TRUST them. The fact is that in any market, for each bar, there are only 5 pieces of information, the open, close, high, low and volume, yet there are now hundreds of indicators. Most of these indicators are displaying the same information and so are redundant.

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

But the way I use them is quite special, to learn more about how to become an expert at technical analysis visit:

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