The 12 most discussed stocks on HC seem to have an average market cap of around 50M. They are known as micro caps, penny dreadful's, bubble & squeak. They require a different investment technique to the ASX heavy lifters (CIM, RMD,RHC,SYD,IFT etc) as volatility is their common theme.
I never allocate more than 2% of my funds to this part of the market.
I note some saying 30 or 40% of their funds are in one (micro cap) stock.
Reminds me of the line from the film Top Gun: "Gutsiest move iv'e ever seen"
I like the EVE story, buying in about 8 months ago.
I set a trailing stop loss of 25% for micro caps, so when .032c was hit and the retrace began, I was out at .024c. I then bought back in at .020c retaining sufficient cash to return initial capital, take a 50% profit on those funds and make the balance of shares held, 'free carry'.
I did the same with 88E, which is still 'in play' and free carry.
My most recent play is GSW, purchased 3 months ago. With a market cap of $650M I set the stop loss at 20%, because, theoretically a higher cap stock should have less volatility. They reached $4-60 and the retrace began so I was out at
$3-68. I then bought back in last month at $2-15, returned my capital, took a profit and have current shares 'free carry'.
This end of the market requires you to be a lot more nimble.It can be incredibly rewarding but equally frustrating. NEVER put money into these stocks you can not afford to loose.
I have been in equities for 40 years now and must admit that this end of the market is still the most challenging and rewarding, not so much for the money you make, but for the percentage gains. It's good for the ego!
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