It is true that low priced stocks are very volatile and risky, but they equally help market players to grow their portfolios and create wealth for discerning investors in the medium to long-term due to their growth potentials and nature.
Investing or trading in small-cap stocks can be a rewarding strategy for those seeking higher returns and increased diversification. You must, however, understand the market, develop effective strategies, and carefully select the best low-priced stocks to invest in any market cycle.
When it comes to investing in small-cap stocks, having effective strategies in place is essential to maximize your potential returns. By following these strategies, you can better handle the small-cap stock market and identify the best opportunities for your trading strategy. Identify Undervalued Opportunities.
One strategy is to search for small-cap stocks that are undervalued or overlooked by the market. Look for companies with strong fundamentals such as solid financials, a comparative advantage, and promising growth outlook. Thereafter, conduct research and analysis to identify these hidden gems that have the potential for significant upside.
Diversify Your Portfolio. This is key when investing in small-cap stocks. By spreading your investments across multiple companies and industries you can reduce the risk posed by individual stock, and increase your chances of capturing the overall market growth. Consider allocating a portions of your portfolio to small-cap stocks while also maintaining a balanced mix of other asset classes.
Leverage market inefficiencies. The small-cap stock market can sometimes be less efficient than larger-cap markets, presenting opportunities for astute investors. Keep an eye out for market inefficiencies, such as mispriced stocks or temporary market dislocations. By taking advantage of these inefficiencies, you can potentially earn higher returns. In all these, it’s important to diversify your portfolio and include a mix of large-cap and small-cap stocks to balance risk and potential returns.
To trade these stocks successfully, you must understand the value areas of the price actions, using the resistance and support levels which is the supply and demand points on the chart. The ongoing earnings season came with increased liquidity, positive momentum, mixed sentiments of buying interest and selling as a result of profit taking and portfolio rebalancing. Also, there is the changing volume pattern with all eyes on more earnings reports as the deadline for submission daily draws closer. Below are the index and price action to watch:
NGXASI Weekly Chart (Opening chart)
JAPAUL GOLD Weekly Chart
AIICO Weekly Chart
CORNERSTONE Weekly Chart
CONSOLIDATED HALLMARK INSURANCE PLC Daily Chart
LASACO ASSURANCE Weekly Chart
AXA MANSARD INSURANCE Weekly Chart
NEM Weekly Chart
CHAMS Weekly Chart
NPF MICROFINANCE Weekly Chart
MAY & BAKER Weekly Chart
STERLINGNG Weekly Chart
UNITY BANK Weekly Chart
JAIZ BANK Weekly Chart