A lot of people like to trade small-cap stocks because you can potentially make substantial profits if you invest in the right companies. However as many seasoned investors will know, it's not as easy as it seems. This is why you need to invest in the right companies at the right time, and one way you can do this is to look out for high volume stocks. With regards to trading, volume basically refers to the amount of shares that are exchanged during a particular trading day. It's obviously not that useful when looking at the bigger stock market listed companies because they usually see high levels of volume anyway, but when applied to small-cap stocks that normally have very low volumes, it can be absolutely invaluable. The trick is to look for small-cap stocks that are seeing abnormal amounts of volume. For example if the volume for a particular stock is usually around 10,000 shares but the share price suddenly rises after 1,000,000 shares change hands, then this should tell you that the price is about to move a lot higher. This upsurge in volume could be due to a number of reasons. It could be a director buying shares in their own company, financial institutions stake building, or simply just speculation that a bidder may be eyeing up the company with a view to a takeover bid. Whatever the reason you can often make some healthy profits by jumping on board soon after you notice this spike in volume. This is particularly true if the company in question has been unloved for an extended period of time. If the share price hardly ever moves and the volume per day is usually minimal, then it can be a great time to jump on board when there is a sudden flurry of buying activity. Of course you should always do your homework about a particular company before you put your own money at stake, but if the company is financially secure and has excellent growth prospects, then it's not a bad idea to invest in them when interest suddenly picks up. So the point we want to get across in this article is that with regard to small-cap stocks, you really should incorporate volume into your trading plan. Even if you are taking a long-term view it's still best to invest in shares when there is some interest in them because otherwise they can drift sideways (or downwards) for many months. If you are just a short-term trader, you can make some substantial returns by jumping on small-cap stocks that are currently proving very popular with investors Paradigm Capital Management has announced the launch of a micro-cap strategy, available both as an institutional separate account and as one of our mutual fund offerings. With a long history of small-cap investing, Paradigm Capital Management 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 us at (518) 431-3500 Read also: Redeemable and Futuristic Investment Options With Small Penny Stocks
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