Whatever term you like to use, whether it be penny stocks or micro cap stocks, you probably realize the huge potential there is. There are a lot of folks out there who bet on a stock and won big time.
The flip side is that many people lose a ton of money by betting on cheap equities. The equation of playing micro cap stocks amounts to putting the odds in your favor as much as you possibly can, and attempting to minimize your risk as best as you can.
Let’s look at how to put the odds in your favor to maximize profit potential before you buy a micro cap stock:
- Identify bullish technical analysis patterns that suggest a break to the upside
- Monitor news releases and gauge the optimism portrayed within the news
- Recognize past resistance levels and plan to exit or reduce your position accordingly
- Check the percentage of shorts in the stock you are interested in, the higher the better
- Research and recognize future newsworthy events that could negatively or positively affect share prices, for example quarterly earnings release dates or projected dates for announcements on FDA approval of new drugs that have the ability to bring large profits to small pharma companies.
Now we can look at how to minimize our risk when playing micro cap stocks, since undoubtedly there will be some losers:
- Utilization of stop loss orders, setting them just below previous support levels can save you an absolute huge amount of money if the stock goes south fast
- Watch news develop concerning earnings power for the company and sell if you find credible evidence that bearish sentiment will prevail by the time the next quarterly earnings release is out
- If your gut tells you to sell you with a small or moderate loss, do it!
If all of this sounds like gibberish to you, our experts at Paradigm Capital Management recommend that you get a little more familiar with micro caps and stocks in general. However don’t think for a minute this stuff is over your head. If you have a burning desire to make it big by playing the market, then you stand an excellent chance at achieving your dreams. Maybe you just need a little hand holding to get you on the right track.
For more details you can consult with the experts at Paradigm Capital Management a trusted leader in small cap investing. The company employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact.
To learn more about how Paradigm Capital Management’s capabilities align with your long-term goals, please contact at (518) 431-3500
Or visit us here: http://paradigmcapital.com/