Today's stock market is not like the market of the good old
days. In the 1990s, you would put your money in the market and just
watch it grow. Not so any longer. Over the last ten years, the
S&P 500 is essentially flat.
Today, you have to fight for every percent, and use the
appropriate buy or sell order. Properly timing your stock purchases
will help you to eke out extra gains, and protect against losses as
Here are a few techniques to help get you started:
The standard, default order is called a market order. This simply
means that your trade will be executed at the current market price.
Market orders are generally executed immediately at the best price
offered by a market maker, a firm that is quoting a buy a sell
price for stock.
For small caps with low volatility, the market order is an easy
one to place. However, with more volatile stocks, you might get
some unexpected surprises upon execution. Use market orders if you
must buy or sell a stock immediately and the execution of the trade
is more important to you than the price of the transaction.
When you place a limit order, you state the exact price at which
you want to make a purchase or sale. The order will only be placed
if that price is available. This is a smart way to buy and sell
small caps, because you set and control the price; if the market
price varies from that level, the buy or sell order will not go
through. However, limit orders are not effective if you want to
make the trade
, since the trade may not be executed.
As the name suggests, the stop-loss order is used to limit losses.
This order includes a price trigger that generates a sell if the
stock falls to a specified price level. When shares fall to the
prescribed price, a market order to sell the stock is executed.
With small caps, you must be careful, as the volatility could "stop
out" a position based on intra-day volatility. Therefore, use these
cautiously, and set them at a price at which you'll definitely want
to sell the stock. For hands-on investors watching the market, stop
losses are less useful, since you're always watching your
When you're ready to jump on a stock there are three main types
of analysis I like to do:
Don't expect to draw a conclusion about a company as if it were
locked at one point in time. Everything changes. Just think of the
company where you work - surely things were different a year ago,
and there are plans to change things in the coming year. This is
especially true with small caps, where growth trends can be fast.
It is critical that you monitor the fundamentals in the companies
you invest in for potential game-changing developments.
Follow financial trends and look for leveling-out of those
Every trend levels out at some point, even the ones we wish could
go on forever. Be on the lookout for subtle changes in revenue,
earnings, and the other trends you monitor. You want to make your
buy and sell decisions
the change becomes obvious to everyone else.
Track moving averages and identify buy and sell signals.
The use of moving averages is probably the strongest of the
technical tools you can use. The averages offset short-term price
volatility and show you what is likely to occur in the coming weeks
or months. Changes in the moving averages can improve your timing
of buy and sell decisions and should be watched closely.
I just used the above 'rules' to help pick up a high yielding
small cap stock that is paying a nine percent dividend right now.
This company went public in 2006 - and has paid a dividend every
quarter since its IPO. Already it has paid out $5.36 in dividends,
and it made it through the recession without cutting a single
Right now this compay's quarterly dividend is yielding over nine
percent when annualized. I believe it is a screaming buy. It
generates cash flow from more than 8 businesses (it just purchased
its eighth) - each of which is a leader in their respective niche
markets. It's one of the single best dividend paying stocks out
there, in any market cap class.
If you'd like to learn more about this stocks,
and you'll be able to sign up for a risk-free trial subscription to
Small Cap Investor PRO
. You can check out this company in my recent Special Report that
includes two high yielding small cap value stocks.