| > | | | | picture becomes slightly murkier than with sell |
| Ever hear of no risk, no reward? Well, buying riskier | | | | strategies of stocks that are falling. When a stock |
| small cap stocks that could return triple digit gains | | | | passes through your 15% stop loss order (see part I of |
| doesn’t have to be a risky proposition. In the | | | | this article), it will sell automatically, no questions asked, |
| first three articles of this small and micro cap series, | | | | with all emotions removed from that decision. But what |
| the first four rules focused on buying strategies. In this | | | | do you do when the stock is shooting skyward with |
| last article, the last and fifth rule will cover selling | | | | seemingly unlimited upside? It depends on |
| strategies. Ever hear of no risk, no reward? Well, | | | | what’s driving the price up. If pure speculation is |
| buying riskier small cap stocks that could return triple | | | | the only thing driving the price, sell half your position and |
| digit gains doesn’t have to be a risky proposition. | | | | then put trailing stop losses of 20% on the remaining |
| In the first three articles of this small and micro cap | | | | half. In other words, now that stock YYY has risen to |
| series, the first four rules focused on buying strategies. | | | | $5 a share from my original buy-in price of $3 a share, |
| In this last article, the last and fifth rule will cover selling | | | | I sell half my position, and my stop loss price on the |
| strategies. | | | | remaining half has now moved up to $4.25 a share. |
| Rule Number Five: Remove emotions from your | | | | This way I’ve locked in my predetermined 67% |
| decisions with disciplined selling strategies.So now that | | | | gain on half of my position of YYY and the least |
| we’ve covered how to buy in to such stocks, | | | | amount of profit I can make on the remaining half is |
| let’s review selling strategies because they are | | | | 42%. Now if earnings and sales are driving the price |
| just as important. With selling, always limit your | | | | up, I may take another strategy. Instead of selling half |
| downside with stop losses of 10%-15% in long positions | | | | of my position in YYY, I’ll hold onto my entire |
| and stop losses of 25% with options. Using this | | | | position, but again institute a trailing stop loss of 20%, |
| strategy eliminates much of the risk from attempting to | | | | moving my stop loss price-point up to $4.25. This is |
| capitalize on double digit and triple digit gains. In fact, | | | | riskier than the first strategy, but the important thing to |
| once you become good at identifying opportunities, | | | | note is that I am still locking in gains. In this scenario, I still |
| having winning pick percentages of 70%-85% would | | | | guarantee myself a 42% gain no matter what |
| not be unusual. And if you attain these percentages, | | | | happens with the stock from here on out. The key, |
| the 15% of picks you lose several hundred dollars in | | | | and I can’t emphasize this enough, is to always |
| becomes irrelavant when offest by your huge gains. In | | | | take gains off the table or to lock them in with trailing |
| reviewing what to do about gains, just abide by one | | | | stops. By doing this, you remove your emotions from |
| rule. Don’t get greedy and always lock in gains. | | | | your decisions. Formulate a disciplined sell strategy and |
| If you don’t get greedy, there is no way you | | | | you’ll make a lot more money than you would |
| should not make money from a stock that has | | | | by trying to forecast the direction of the small and |
| experienced explosive growth. But this scenario does | | | | micro-cap stocks you invest in. Plus you’ll save |
| happen. And only one thing causes this to happen. | | | | a lot of money on the psychiatrist you won’t |
| Greed. People will watch 100% profits turn into 20% | | | | have to hire due to all the unnecessary stress you |
| losses because of greed. Just as you did with your | | | | would have caused yourself by not employing these |
| buy in price, have a predetermined selling price. As | | | | strategies. |
| opposed to the buy in price range, I would choose a | | | | So to summarize, always limit your downside and lock |
| more specific price. For example, let’s consider | | | | in gains with stop loss orders when investing in small |
| stock YYY again and assume you bought the stock | | | | and micro cap stocks and you can invest in stocks |
| for $3 a share. Say you set your goal at $5 a share, a | | | | with enormous potential without the stress associated |
| 67% increase, but that it blows right through that price | | | | with the enormous risk of some of these stocks. |
| two weeks later. Now what do you do? Hold on or | | | | © 2006 Global Market Opportunities, Inc. |
| sell? With sell strategies of rapidly rising stocks, the | | | | |