- 1). First you need to do some research on the area of small caps you are interested. You need to pick an area that you are familiar with,electronics,retail,over the counter stocks. Try and stay in a area of small companies that have great profit potential. You can use a stock screener to help narrow your search. Most stock brokers will have a small cap stock screener that you can use. You can set the share price you want to start out with You can set the profits and sales revenue criteria and so on. A stock screen will be a huge help finding the right small cap stock to buy.
- 2). Set yourself some kind of plan on what type of companies you would like to look for. The first place is to look at a combines earnings. Many of the stock brokers will have a ranking on the earnings power a small company will have. They will provide you with the earning outlook and how the company has done in the last few quarters. Look to see if the business has growth potential. Some companies have suffered in a bad economy but could turn around when things improve. Make sure to check there earnings per share when the economy is booming.
- 3). If the stock price is down due to a few bad quarters this might be the time to buy. Some companies stock move at different times of the year. A small cap retailer or stocks in cyclical industries might be low in the winter after Christmas but after summer start moving up as we get closer to the holidays. The best time to do your research is on the weekend after the markets are closed. This way any news out during the week is figured into the current price. Before you decide to buy a small cap stock read about the company and do some due diligence. How long have they been in business. Has the stock split and so on.
- 4). Make sure to research stocks that are overseas. Take a look at China ,India ,Japan they could have some undervalued stocks worth looking at. When you decide to but the stock make sure to set a stop loss to protect your trading capitol. Never trade with out a stop loss especially in small cap stocks. If the stock is moving in your favor reset the stop loss.Remember these stock can move up fast but they can also move down just as fast so make sure to put in stops accordingly.
- Advertisement -
- Advertisement -