A day trader has many options available to trade. One can be a specialize in trading currencies, commodities, bonds, options, equities, and indices. If ones happen to play well based on the rules will make much money with the asset’s classes. On the other hand, it can be broken into pieces if one does not adhere to the rules. Many day traders are opting to specialize in currencies, which are usually more liquid than other asset classes and available to be traded for 24 hours-based services. thestockdork.com is a stock market platform which works on a mission to teach the investors both the ins and outs of investing in stock and make the investors into money makers.
Basically, there are 4 types of traders, they are:
- Specialized in small cap stocks.
- Specialized in mid-cap companies.
- Specialized in large caps.
- Traders who combine the 3 assets.
Small cap stocks are small companies which has a market capitalization of less than $1 billion. Mid-caps companies which have a capitalization of between $1 billion and $5 billion. Large caps are companies which have market capitalization of more than $10 million. Trading in all these equities can make large sum of money, but those involved in small cap stocks leads to certain uncertainties involved. Large investors show more interest in buying mid cap and large cap companies.
Most small cap companies must have been a former middle cap or large cap sized companies must have fallen from billions in market capitalization to millions. There are numerous numbers of reasons involved in it.
- Poor Management
- Increased Competition
- Natural disasters.
- Lack of Investor trust among others,
- Small cap companies usually have problems in reporting where the information is not readily available.
- Companies suffer with very poor managements.
For Day traders, small cap companies seem to be a better choice because of best cheap share price. Large cap company such as Berkshire Hathaway’s shares a trade profit of more than 200k per share, so an independent trader cannot achieve this.
Things to be done and must do it:
A trader first must study about the market, this is known as market scanning. It is a process where the trader studies about the small cap stocks and studies each one of them. Traders looks for the companies that are solid. The main job of a day trader is you do not need to know all details about the company. This is because you are in an idea of opening a trade (short or long) and awaiting for it to go positive.
A day trader must avoid the temptation of holding small cap stocks for a very long duration. Most of the small cap companies would lag in its s intrinsic value that is usually available in large cap companies. Mostly, small cap companies are heavily in debts. Once you have exited the company, you should avoid trading it again for the day. If happen to continue, you will lose the entire investment.