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Saturday, February 25, 2012

Stock Trading tips for SMALLCAPS companies

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Small Cap stocks is stock category of companies which has low market capitalization, Or companies which are growing fast but donot satisfy terms to be categorised in Midcaps or large-caps, majority of Large-cap or Midcap companies were once small caps. Now market capitalization cap for small caps differ in different stock markets and is different in various countries, for instance Company with market capitalization between $ 300 million to $ 2 billion today might be termed as samll cap in USA. whereas in India it might be midcap stock. In general investing in small caps is considered as more riskier then investing in blue-chip(large cap) stocks because the company is in growing mode hence while investing in small caps one should know about the promoters capabilities of the company befor making any investing decision into small cap stocks.

In this post I would discuss about stock trading tips for SMALLCAP stocks, but some of these tips are same as for midcap stocks or large-cap stocks. However these tips are equally useful for people with interests in day trading. But do follow the gudance of your brain.

Understand Stock Charts: One must thing to do for an investor before investing in a company is to understand and analysis of the stock chart of the company. Investor should analyse atleast 1 year chart before making any investment in shortlisted company. read my post on Stock Charts for detailed information on this tip.

Stock Trading Softwares: In present day there thousands of stock trading softwares available in market which often misleads by claiming to make you millionaire overnight, such claims are false and there is no such thing as easy money and overnight riches except if you are into lottery business where there is remote probability for winning jackpot. One should carefully choose the day trading software for starting trading in SMALLCAPS.

Manage Risk Properly: Around 70 percent of people doing day trading end up making losses. This is majorly because of no risk management done by the individual before investing their money. Always invest in various sectors and donot put your whole money into one single sector. Stock diversification is the key for minimising risks.

Choose your broker wisely: These are 'n' number of brokers in stock markets and some are even fraudulants. Investor should choose his broker wisely because all the transactions have to go through your broker firm. Ask potential brokers about what charts they offer, and if there is any charge for real time tick-by-tick chart screens. My earlier post on Choosing broker would be helpful for the readers.

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