How to trade Microcap stocks? ?

Question

I am a fairly active Microcap investor but get pretty frustrated when trying to put on a larger position (say 500+) shares in a microcap company. Spreads are pretty high and the price always runs away from me as I feel like the market maker is making all the money. Anyone else experience this and any suggestions?

Answer 1

You're right.  This is no place for a novice. Read several books on stock trading. Then read several on trading micro caps.

You should be using technical analysis to enter your trades. Set a limit price (NEVER BUY "MARKET"). Always have an exit plan before you buy.

For general technical insight everyday;

http://www.alphatrends.net/

Answer 2

Stick with ones with a more reasonable spread between bid and ask.  If there is a big spread, the market maker is telling you he is nervous.

Answer 3

Thinly traded stocks can be easily manipulated by the mutual funds, hedge funds, and the like

Answer 4

High volume micro cap do better since there is little technical to predict low volume movements.  

Answer 5

I'd say to buy stocks that have a high price, but a low PE ratio or that have high growth potential.  I wouldn't invest in pennies because 1) they don't have regulatory approval and 2) they have very little chance of success.

Buy stocks with a solid balance sheet and great ideas. Don't buy a debt ridden company, such that you are asking for trouble.

ALWAYS USE LIMIT ORDERS. The price should vary based on the volatility of the stock over the past day, week, or month and the volatility of the market on that particular day.

Good luck!